[20-F] Sumitomo Mitsui Financial Group, Inc American Files Annual Report (Foreign Issuer)
Sumitomo Mitsui Financial Group (NYSE:SMFG) filed its FY-2025 Form 20-F.
- 3-for-1 stock split effective 1 Oct 2024; all per-share data retroactively adjusted.
- New line item: “Net gains (losses) from derecognition of financial assets at amortized cost.”
- Interest on Bank of Japan deposits reclassified; prior years restated.
- Losses stemmed from sales of low-profit loans in Europe & the Middle East to boost capital efficiency.
- Deferred-tax assets recognized nationally but not locally: ¥304.3 bn (2025) vs ¥221.5 bn (2024); current statutory tax rate 30.6%, slated to change from FY-2027.
- Housing-loan portfolio edged up to ¥11.12 tn (+1%).
No headline earnings were included in the excerpt; investors should review the full filing for profitability and capital metrics.
Sumitomo Mitsui Financial Group (NYSE:SMFG) ha depositato il modulo 20-F per l'anno fiscale 2025.
- Scissione azionaria 3 per 1 efficace dal 1° ottobre 2024; tutti i dati per azione sono stati rettificati retroattivamente.
- Nuova voce: “Utili (perdite) nette dalla derecognizione di attività finanziarie a costo ammortizzato.”
- Gli interessi sui depositi presso la Banca del Giappone sono stati riclassificati; gli anni precedenti sono stati rettificati.
- Le perdite derivano dalla vendita di prestiti a basso rendimento in Europa e Medio Oriente per migliorare l'efficienza del capitale.
- Attività per imposte differite riconosciute a livello nazionale ma non locale: ¥304,3 miliardi (2025) contro ¥221,5 miliardi (2024); l’aliquota fiscale statutaria attuale è del 30,6%, con modifiche previste a partire dall’anno fiscale 2027.
- Il portafoglio di mutui residenziali è leggermente aumentato a ¥11,12 trilioni (+1%).
Non sono stati inclusi dati sugli utili principali nell’estratto; gli investitori sono invitati a consultare il documento completo per informazioni su redditività e indicatori patrimoniali.
Sumitomo Mitsui Financial Group (NYSE:SMFG) presentó su formulario 20-F para el año fiscal 2025.
- División de acciones 3 por 1 efectiva a partir del 1 de octubre de 2024; todos los datos por acción ajustados retroactivamente.
- Nueva partida: “Ganancias (pérdidas) netas por la baja de activos financieros a costo amortizado.”
- Los intereses sobre los depósitos en el Banco de Japón fueron reclasificados; se han ajustado los años anteriores.
- Las pérdidas provienen de la venta de préstamos de bajo rendimiento en Europa y Medio Oriente para mejorar la eficiencia del capital.
- Activos por impuestos diferidos reconocidos a nivel nacional pero no local: ¥304,3 mil millones (2025) frente a ¥221,5 mil millones (2024); la tasa impositiva estatutaria actual es del 30,6%, con cambios previstos a partir del año fiscal 2027.
- La cartera de préstamos hipotecarios aumentó ligeramente a ¥11,12 billones (+1%).
No se incluyeron ganancias principales en el extracto; se recomienda a los inversores revisar el informe completo para métricas de rentabilidad y capital.
스미토모 미쓰이 금융 그룹 (NYSE:SMFG)이 2025 회계연도 20-F 양식을 제출했습니다.
- 3대 1 주식 분할이 2024년 10월 1일부터 시행되며, 모든 주당 데이터는 소급 조정되었습니다.
- 새 항목: “상각원가 금융자산의 제거로 인한 순이익(손실).”
- 일본은행 예금의 이자 재분류; 이전 연도도 재작성됨.
- 유럽 및 중동 지역의 저수익 대출 매각으로 인한 손실, 자본 효율성 제고 목적.
- 이연법인세자산은 국가 차원에서는 인식되었으나 지역 차원에서는 미인식: 2025년 ¥3043억엔, 2024년 ¥2215억엔; 현재 법정 세율 30.6%, 2027 회계연도부터 변경 예정.
- 주택담보대출 포트폴리오가 소폭 증가하여 ¥11.12조엔(+1%).
요약본에는 주요 순이익이 포함되지 않았으므로, 투자자는 수익성과 자본 지표를 확인하기 위해 전체 보고서를 검토해야 합니다.
Sumitomo Mitsui Financial Group (NYSE:SMFG) a déposé son formulaire 20-F pour l’exercice 2025.
- Fractionnement d’actions 3 pour 1 effectif au 1er octobre 2024 ; toutes les données par action ont été ajustées rétroactivement.
- Nouvelle rubrique : « Gains (pertes) nets issus de la radiation d’actifs financiers au coût amorti. »
- Les intérêts sur les dépôts à la Banque du Japon ont été reclassés ; les années précédentes ont été retraitées.
- Les pertes résultent de la vente de prêts peu rentables en Europe et au Moyen-Orient pour améliorer l’efficacité du capital.
- Actifs d’impôts différés reconnus au niveau national mais pas local : ¥304,3 milliards (2025) contre ¥221,5 milliards (2024) ; taux d’imposition légal actuel de 30,6 %, prévu de changer à partir de l’exercice 2027.
- Le portefeuille de prêts immobiliers a légèrement augmenté à ¥11,12 trillions (+1 %).
Aucun bénéfice principal n’a été inclus dans cet extrait ; les investisseurs sont invités à consulter le dossier complet pour les indicateurs de rentabilité et de capital.
Sumitomo Mitsui Financial Group (NYSE:SMFG) hat seinen 20-F-Bericht für das Geschäftsjahr 2025 eingereicht.
- Aktien-Split 3 zu 1 mit Wirkung zum 1. Oktober 2024; alle Daten pro Aktie wurden rückwirkend angepasst.
- Neue Position: „Nettoerträge (Verluste) aus der Ausbuchung von finanziellen Vermögenswerten zum fortgeführten Anschaffungskosten.“
- Zinsen auf Einlagen bei der Bank of Japan wurden umklassifiziert; Vorjahre wurden entsprechend angepasst.
- Verluste entstanden durch den Verkauf von niedrig rentierlichen Krediten in Europa und dem Nahen Osten zur Steigerung der Kapitaleffizienz.
- Latente Steueransprüche wurden auf nationaler Ebene, jedoch nicht lokal anerkannt: ¥304,3 Mrd. (2025) gegenüber ¥221,5 Mrd. (2024); aktueller gesetzlicher Steuersatz 30,6 %, Änderung ab dem Geschäftsjahr 2027 geplant.
- Das Wohnungsbaudarlehensportfolio stieg leicht auf ¥11,12 Billionen (+1 %).
Im Auszug wurden keine Überschusskennzahlen angegeben; Investoren sollten den vollständigen Bericht für Rentabilitäts- und Kapitalkennzahlen prüfen.
- None.
- None.
Insights
TL;DR: Stock split lifts liquidity; earnings detail missing.
The 3-for-1 split is shareholder-friendly but value-neutral. A dedicated derecognition line clarifies loan-book management, yet the absence of net-income figures limits assessment of core performance. Housing-loan growth indicates stable domestic demand, while ¥82.8 bn uptick in unrecognized local-tax DTAs suggests future tax-efficiency challenges. Overall, disclosure changes improve transparency but leave profitability questions open.
TL;DR: Loan sales cut risk; watch deferred-tax build.
Selling under-earning EMEA loans reduces credit risk and capital drag, though immediate losses hit the new derecognition line. Rising national-vs-local deferred-tax gap could pressure future ROE if earnings slow. Upcoming 2026 tax-rate shift should marginally ease the burden. No red flags on housing loans, but full NPL and capital ratios are needed for a definitive view.
Sumitomo Mitsui Financial Group (NYSE:SMFG) ha depositato il modulo 20-F per l'anno fiscale 2025.
- Scissione azionaria 3 per 1 efficace dal 1° ottobre 2024; tutti i dati per azione sono stati rettificati retroattivamente.
- Nuova voce: “Utili (perdite) nette dalla derecognizione di attività finanziarie a costo ammortizzato.”
- Gli interessi sui depositi presso la Banca del Giappone sono stati riclassificati; gli anni precedenti sono stati rettificati.
- Le perdite derivano dalla vendita di prestiti a basso rendimento in Europa e Medio Oriente per migliorare l'efficienza del capitale.
- Attività per imposte differite riconosciute a livello nazionale ma non locale: ¥304,3 miliardi (2025) contro ¥221,5 miliardi (2024); l’aliquota fiscale statutaria attuale è del 30,6%, con modifiche previste a partire dall’anno fiscale 2027.
- Il portafoglio di mutui residenziali è leggermente aumentato a ¥11,12 trilioni (+1%).
Non sono stati inclusi dati sugli utili principali nell’estratto; gli investitori sono invitati a consultare il documento completo per informazioni su redditività e indicatori patrimoniali.
Sumitomo Mitsui Financial Group (NYSE:SMFG) presentó su formulario 20-F para el año fiscal 2025.
- División de acciones 3 por 1 efectiva a partir del 1 de octubre de 2024; todos los datos por acción ajustados retroactivamente.
- Nueva partida: “Ganancias (pérdidas) netas por la baja de activos financieros a costo amortizado.”
- Los intereses sobre los depósitos en el Banco de Japón fueron reclasificados; se han ajustado los años anteriores.
- Las pérdidas provienen de la venta de préstamos de bajo rendimiento en Europa y Medio Oriente para mejorar la eficiencia del capital.
- Activos por impuestos diferidos reconocidos a nivel nacional pero no local: ¥304,3 mil millones (2025) frente a ¥221,5 mil millones (2024); la tasa impositiva estatutaria actual es del 30,6%, con cambios previstos a partir del año fiscal 2027.
- La cartera de préstamos hipotecarios aumentó ligeramente a ¥11,12 billones (+1%).
No se incluyeron ganancias principales en el extracto; se recomienda a los inversores revisar el informe completo para métricas de rentabilidad y capital.
스미토모 미쓰이 금융 그룹 (NYSE:SMFG)이 2025 회계연도 20-F 양식을 제출했습니다.
- 3대 1 주식 분할이 2024년 10월 1일부터 시행되며, 모든 주당 데이터는 소급 조정되었습니다.
- 새 항목: “상각원가 금융자산의 제거로 인한 순이익(손실).”
- 일본은행 예금의 이자 재분류; 이전 연도도 재작성됨.
- 유럽 및 중동 지역의 저수익 대출 매각으로 인한 손실, 자본 효율성 제고 목적.
- 이연법인세자산은 국가 차원에서는 인식되었으나 지역 차원에서는 미인식: 2025년 ¥3043억엔, 2024년 ¥2215억엔; 현재 법정 세율 30.6%, 2027 회계연도부터 변경 예정.
- 주택담보대출 포트폴리오가 소폭 증가하여 ¥11.12조엔(+1%).
요약본에는 주요 순이익이 포함되지 않았으므로, 투자자는 수익성과 자본 지표를 확인하기 위해 전체 보고서를 검토해야 합니다.
Sumitomo Mitsui Financial Group (NYSE:SMFG) a déposé son formulaire 20-F pour l’exercice 2025.
- Fractionnement d’actions 3 pour 1 effectif au 1er octobre 2024 ; toutes les données par action ont été ajustées rétroactivement.
- Nouvelle rubrique : « Gains (pertes) nets issus de la radiation d’actifs financiers au coût amorti. »
- Les intérêts sur les dépôts à la Banque du Japon ont été reclassés ; les années précédentes ont été retraitées.
- Les pertes résultent de la vente de prêts peu rentables en Europe et au Moyen-Orient pour améliorer l’efficacité du capital.
- Actifs d’impôts différés reconnus au niveau national mais pas local : ¥304,3 milliards (2025) contre ¥221,5 milliards (2024) ; taux d’imposition légal actuel de 30,6 %, prévu de changer à partir de l’exercice 2027.
- Le portefeuille de prêts immobiliers a légèrement augmenté à ¥11,12 trillions (+1 %).
Aucun bénéfice principal n’a été inclus dans cet extrait ; les investisseurs sont invités à consulter le dossier complet pour les indicateurs de rentabilité et de capital.
Sumitomo Mitsui Financial Group (NYSE:SMFG) hat seinen 20-F-Bericht für das Geschäftsjahr 2025 eingereicht.
- Aktien-Split 3 zu 1 mit Wirkung zum 1. Oktober 2024; alle Daten pro Aktie wurden rückwirkend angepasst.
- Neue Position: „Nettoerträge (Verluste) aus der Ausbuchung von finanziellen Vermögenswerten zum fortgeführten Anschaffungskosten.“
- Zinsen auf Einlagen bei der Bank of Japan wurden umklassifiziert; Vorjahre wurden entsprechend angepasst.
- Verluste entstanden durch den Verkauf von niedrig rentierlichen Krediten in Europa und dem Nahen Osten zur Steigerung der Kapitaleffizienz.
- Latente Steueransprüche wurden auf nationaler Ebene, jedoch nicht lokal anerkannt: ¥304,3 Mrd. (2025) gegenüber ¥221,5 Mrd. (2024); aktueller gesetzlicher Steuersatz 30,6 %, Änderung ab dem Geschäftsjahr 2027 geplant.
- Das Wohnungsbaudarlehensportfolio stieg leicht auf ¥11,12 Billionen (+1 %).
Im Auszug wurden keine Überschusskennzahlen angegeben; Investoren sollten den vollständigen Bericht für Rentabilitäts- und Kapitalkennzahlen prüfen.
Table of Contents
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the fiscal year ended |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to |
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report |
(Jurisdiction of incorporation or organization) |
(Address of principal executive offices) |
Title of Each Class |
Trading Symbol(s) |
Name of Each Exchange on which registered | ||
| * | for trading, but only in connection with the listing of the American Depositary Shares, each American Depositary Share representing 3/5 of one share of the registrant’s common stock. |
| Accelerated Filer ☐ | Non-accelerated Filer ☐ |
Emerging Growth Company |
| U.S. GAAP ☐ | Other ☐ |
Table of Contents
TABLE OF CONTENTS
| Page | ||||||||
| Certain Defined Terms, Conventions and Presentation of Financial Information |
1 | |||||||
| Cautionary Statement Regarding Forward-Looking Statements |
2 | |||||||
| PART I |
3 | |||||||
| Item 1. |
Identity of Directors, Senior Management and Advisers | 3 | ||||||
| Item 2. |
Offer Statistics and Expected Timetable | 3 | ||||||
| Item 3. |
Key Information | 3 | ||||||
| 3.A. |
Selected Financial Data | 3 | ||||||
| 3.B. |
Capitalization and Indebtedness | 4 | ||||||
| 3.C. |
Reasons for the Offer and Use of Proceeds | 4 | ||||||
| 3.D. |
Risk Factors | 4 | ||||||
| Item 4. |
Information on the Company | 23 | ||||||
| 4.A. |
History and Development of the Company | 23 | ||||||
| 4.B. |
Business Overview | 24 | ||||||
| 4.C. |
Organizational Structure | 63 | ||||||
| 4.D. |
Property, Plant and Equipment | 65 | ||||||
| Item 4A. |
Unresolved Staff Comments | 66 | ||||||
| Item 5. |
Operating and Financial Review and Prospects | 66 | ||||||
| 5.A. |
Operating Results | 71 | ||||||
| 5.B. |
Liquidity and Capital Resources | 100 | ||||||
| 5.C. |
Research, Development, Patents and Licenses | 107 | ||||||
| 5.D. |
Trend Information | 107 | ||||||
| 5.E. |
Critical Accounting Estimates | 107 | ||||||
| Item 6. |
Directors, Senior Management and Employees | 107 | ||||||
| 6.A. |
Directors and Senior Management | 107 | ||||||
| 6.B. |
Compensation | 119 | ||||||
| 6.C. |
Board Practices | 120 | ||||||
| 6.D. |
Employees | 123 | ||||||
| 6.E. |
Share Ownership | 125 | ||||||
| 6.F. |
Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation | 129 | ||||||
| Item 7. |
Major Shareholders and Related Party Transactions | 130 | ||||||
| 7.A. |
Major Shareholders | 130 | ||||||
| 7.B. |
Related Party Transactions | 130 | ||||||
| 7.C. |
Interests of Experts and Counsel | 131 | ||||||
| Item 8. |
Financial Information | 131 | ||||||
| 8.A. |
Consolidated Statements and Other Financial Information | 131 | ||||||
| 8.B. |
Significant Changes | 132 | ||||||
| Item 9. |
The Offer and Listing | 132 | ||||||
| 9.A. |
Offer and Listing Details | 132 | ||||||
| 9.B. |
Plan of Distribution | 132 | ||||||
| 9.C. |
Markets | 132 | ||||||
| 9.D. |
Selling Shareholders | 132 | ||||||
| 9.E. |
Dilution | 132 | ||||||
| 9.F. |
Expenses of the Issue | 133 | ||||||
| Item 10. |
Additional Information | 133 | ||||||
| 10.A. |
Share Capital | 133 | ||||||
| 10.B. |
Memorandum and Articles of Incorporation | 133 | ||||||
| 10.C. |
Material Contracts | 143 | ||||||
| 10.D. |
Exchange Controls | 143 | ||||||
| 10.E. |
Taxation | 148 | ||||||
i
Table of Contents
| Page | ||||||||
| 10.F. |
Dividends and Paying Agents | 152 | ||||||
| 10.G. |
Statement by Experts | 152 | ||||||
| 10.H. |
Documents on Display | 152 | ||||||
| 10.I. |
Subsidiary Information | 152 | ||||||
| 10.J. |
Annual Report to Security Holders | 152 | ||||||
| Item 11. |
Quantitative and Qualitative Disclosures about Credit, Market and Other Risk | 153 | ||||||
| Item 12. |
Description of Securities other than Equity Securities | 167 | ||||||
| 12.A. |
Debt Securities | 167 | ||||||
| 12.B. |
Warrants and Rights | 167 | ||||||
| 12.C. |
Other Securities | 167 | ||||||
| 12.D. |
American Depositary Shares | 168 | ||||||
| PART II |
169 | |||||||
| Item 13. |
Defaults, Dividend Arrearages and Delinquencies | 169 | ||||||
| Item 14. |
Material Modifications to the Rights of Security Holders and Use of Proceeds | 169 | ||||||
| Item 15. |
Controls and Procedures | 169 | ||||||
| Item 16A. |
Audit Committee Financial Expert | 170 | ||||||
| Item 16B. |
Code of Ethics | 170 | ||||||
| Item 16C. |
Principal Accountant Fees and Services | 170 | ||||||
| Item 16D. |
Exemptions from the Listing Standards for the Audit Committee | 171 | ||||||
| Item 16E. |
Purchases of Equity Securities by the Issuer and Affiliated Purchasers | 171 | ||||||
| Item 16F. |
Change in Registrant’s Certifying Accountant | 172 | ||||||
| Item 16G. |
Corporate Governance | 172 | ||||||
| Item 16H. |
Mine Safety Disclosure | 173 | ||||||
| Item 16I. |
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 173 | ||||||
| Item 16J. |
Insider Trading Policies | 174 | ||||||
| Item 16K. |
Cybersecurity | 174 | ||||||
| PART III |
176 | |||||||
| Item 17. |
Financial Statements | 176 | ||||||
| Item 18. |
Financial Statements | 176 | ||||||
| Item 19. |
Exhibits | 176 | ||||||
| Signatures |
178 | |||||||
| Selected Statistical Data |
A-1 | |||||||
| Index to Consolidated Financial Statements |
F-1 | |||||||
ii
Table of Contents
CERTAIN DEFINED TERMS, CONVENTIONS AND
PRESENTATION OF FINANCIAL INFORMATION
As used in this annual report, unless the context otherwise requires, “we,” “us,” “our,” the “Company,” “SMFG” and similar terms refer to Sumitomo Mitsui Financial Group, Inc. as well as to its subsidiaries, as the context requires. “SMBC” refers to Sumitomo Mitsui Banking Corporation, which is one of our commercial banking subsidiaries, or to Sumitomo Mitsui Banking Corporation and its subsidiaries taken as a whole, depending on the context. References to the “SMBC Group” are to us and our subsidiaries and affiliates taken as a whole.
In this annual report, all of our financial information is presented on a consolidated basis, unless we state otherwise. As used in this annual report, “IFRS” means International Financial Reporting Standards as issued by the International Accounting Standards Boards (“IASB”) and “Japanese GAAP” means accounting principles generally accepted in Japan. Our consolidated financial information in this annual report has been prepared in accordance with IFRS, except for the risk-weighted capital ratios, the segmental results of operations and some other specifically identified information, which are prepared in accordance with Japanese banking regulations or Japanese GAAP. Unless otherwise stated or the context otherwise requires, all financial information contained in this annual report is expressed in Japanese yen.
Our fiscal year ends on March 31.
Unless otherwise specified or required by the context: references to “days” are to calendar days; references to “years” are to calendar years and to “fiscal years” are to our fiscal years ending on March 31; references to “$,” “dollars” and “U.S. dollars” are to United States dollars; references to “euros” and “€” are to the currency of those member states of the European Union which are participating in the European Economic and Monetary Union pursuant to the Treaty on European Union; references to “£” and “British pounds sterling” are to the currency of the United Kingdom; and references to “yen” and “¥” are to Japanese yen. Unless otherwise specified, when converting currencies into yen we use our median exchange rates for buying and selling spot dollars, or other currencies, by telegraphic transfer against yen as determined at the end of the relevant fiscal period.
Unless otherwise indicated, in this annual report, where information is presented in millions, billions or trillions of yen or thousands, millions or billions of dollars, amounts of less than one thousand, one million, one billion or one trillion, as the case may be, have been rounded. Accordingly, the total of figures presented in columns or otherwise may not equal the total of the individual items. Except for capital ratios, which have been truncated, percentage data, unless we state otherwise have been subjected to rounding adjustments for the convenience of the reader.
1
Table of Contents
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This annual report contains statements that constitute “forward-looking statements” within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934, as amended (“Securities Exchange Act of 1934”). When included in this annual report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “probability,” “risk,” “project,” “should,” “seek,” “target,” “will” and similar expressions, among others, identify forward-looking statements. You can also identify forward-looking statements in the discussions of strategy, plans or intentions. Such statements, which include, but are not limited to, statements contained in “Item 3. Key Information—Risk Factors,” “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk,” reflect our current views with respect to future events and are inherently subject to risks, uncertainties and assumptions, including the risk factors described in this annual report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described here as anticipated, believed, estimated, expected or intended.
The U.S. Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking information to encourage companies to provide prospective information about themselves. We rely on this safe harbor in making these forward-looking statements.
Forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those in the forward-looking statements as a result of various factors, and the differences may be material. Potential risks and uncertainties include, without limitation, the following:
| • | deterioration of Japanese and global economic conditions and financial markets; |
| • | declines in the value of our securities portfolio; |
| • | changes in the level or volatility of market rates or prices; |
| • | constraints on our operations due to capital adequacy requirements; |
| • | problems of other financial institutions; |
| • | adverse regulatory developments or changes in government policies; |
| • | incurrence of significant credit-related costs; |
| • | a significant downgrade of our credit ratings; |
| • | exposure to new risks as we expand the scope of our business; |
| • | our ability to successfully implement our business strategy through our subsidiaries, affiliates and alliance partners; |
| • | the industry specific risks of the consumer finance industry; |
| • | the recoverability of deferred tax assets; |
| • | insufficient liquidity; |
| • | environmental and social risk; and |
| • | litigation and regulatory proceedings. |
Given these and other risks and uncertainties, you should not place undue reliance on forward-looking statements, which speak only as of the date of the filing of this annual report. We expressly disclaim any obligation to update or to announce publicly any revision to any of the forward-looking statements contained in this annual report to reflect any changes in events, conditions, circumstances or other developments upon which any such statement is based. The information contained in this annual report identifies important factors in addition to those referred to above that could cause differences in our actual results.
2
Table of Contents
PART I
| Item 1. | Identity of Directors, Senior Management and Advisers |
Not applicable.
| Item 2. | Offer Statistics and Expected Timetable |
Not applicable.
| Item 3. | Key Information |
3.A. SELECTED FINANCIAL DATA
Selected Financial Data
The following selected financial data at and for each of the five fiscal years ended March 31, 2025, 2024, 2023, 2022 and 2021 have been derived from our consolidated financial statements. You should read this data together with “Item 5. Operating and Financial Review and Prospects” and our consolidated financial statements included elsewhere in this annual report.
| For the fiscal year ended and at March 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | ||||||||||||||||
| (In millions, except per share data) | ||||||||||||||||||||
| Consolidated income statements data: |
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| Interest income |
¥ | 6,716,741 | ¥ | 5,944,398 | ¥ | 3,696,076 | ¥ | 1,747,654 | ¥ | 1,780,370 | ||||||||||
| Interest expense |
4,202,307 | 4,053,635 | 1,941,006 | 303,716 | 397,245 | |||||||||||||||
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| Net interest income |
2,514,434 | 1,890,763 | 1,755,070 | 1,443,938 | 1,383,125 | |||||||||||||||
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| Fee and commission income |
1,631,319 | 1,469,847 | 1,262,734 | 1,248,225 | 1,174,382 | |||||||||||||||
| Fee and commission expense |
314,931 | 233,715 | 222,920 | 209,762 | 201,723 | |||||||||||||||
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| Net fee and commission income |
1,316,388 | 1,236,132 | 1,039,814 | 1,038,463 | 972,659 | |||||||||||||||
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| Net trading income (loss) |
(186,688 | ) | 349,520 | 626,043 | 280,339 | 237,746 | ||||||||||||||
| Net income from financial assets and liabilities at fair value through profit or loss |
43,524 | 323,217 | 173,311 | 200,249 | 280,012 | |||||||||||||||
| Net investment income |
78,969 | 29,844 | 15,611 | 65,744 | 153,820 | |||||||||||||||
| Net gains (losses) arising from derecognition of financial assets at amortized cost(1) |
(32,179 | ) | 1,550 | (2,760 | ) | 2,631 | 21,689 | |||||||||||||
| Other income(1) |
105,717 | 112,208 | 179,842 | 104,317 | 113,205 | |||||||||||||||
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| Total operating income(1) |
3,840,165 | 3,943,234 | 3,786,931 | 3,135,681 | 3,162,256 | |||||||||||||||
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| Impairment charges on financial assets |
411,278 | 205,096 | 148,464 | 279,978 | 282,486 | |||||||||||||||
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| Net operating income(1) |
3,428,887 | 3,738,138 | 3,638,467 | 2,855,703 | 2,879,770 | |||||||||||||||
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| General and administrative expenses |
2,421,732 | 2,229,701 | 1,965,417 | 1,801,621 | 1,679,115 | |||||||||||||||
| Other expenses(1) |
495,587 | 461,018 | 498,602 | 366,780 | 280,550 | |||||||||||||||
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| Operating expenses(1) |
2,917,319 | 2,690,719 | 2,464,019 | 2,168,401 | 1,959,665 | |||||||||||||||
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| Share of post-tax profit (loss) of associates and joint ventures |
142,678 | 160,370 | 87,428 | (10,838 | ) | 36,373 | ||||||||||||||
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| For the fiscal year ended and at March 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | ||||||||||||||||
| (In millions, except per share data) | ||||||||||||||||||||
| Profit before tax |
654,246 | 1,207,789 | 1,261,876 | 676,464 | 956,478 | |||||||||||||||
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| Income tax expense |
137,802 | 312,039 | 326,027 | 161,389 | 251,402 | |||||||||||||||
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| Net profit |
¥ | 516,444 | ¥ | 895,750 | ¥ | 935,849 | ¥ | 515,075 | ¥ | 705,076 | ||||||||||
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| Profit attributable to: |
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| Shareholders of Sumitomo Mitsui Financial Group, Inc. |
¥ | 478,132 | ¥ | 873,346 | ¥ | 911,831 | ¥ | 499,573 | ¥ | 687,483 | ||||||||||
| Non-controlling interests |
6,676 | 8,641 | 12,708 | 4,771 | 4,471 | |||||||||||||||
| Other equity instruments holders |
31,636 | 13,763 | 11,310 | 10,731 | 13,122 | |||||||||||||||
| Earnings per share(2): |
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| Basic |
¥ | 122.40 | ¥ | 219.04 | ¥ | 222.71 | ¥ | 121.49 | ¥ | 167.24 | ||||||||||
| Diluted |
122.36 | 218.98 | 222.63 | 121.44 | 167.16 | |||||||||||||||
| Weighted average number of common shares in issue (in thousands of shares) |
3,906,456 | 3,987,077 | 4,094,310 | 4,112,213 | 4,110,641 | |||||||||||||||
| Dividends per share in respect of each fiscal year(2): |
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| Common stock |
¥ | 105 | ¥ | 87 | ¥ | 73 | ¥ | 67 | ¥ | 65 | ||||||||||
| $ | 0.70 | $ | 0.57 | $ | 0.55 | $ | 0.54 | $ | 0.59 | |||||||||||
| Consolidated statements of financial position data: |
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| Total assets |
¥ | 292,165,070 | ¥ | 281,271,637 | ¥ | 257,687,038 | ¥ | 248,160,847 | ¥ | 235,024,987 | ||||||||||
| Loans and advances |
125,190,819 | 121,716,465 | 111,891,134 | 104,635,815 | 97,714,938 | |||||||||||||||
| Total liabilities |
275,676,476 | 264,992,539 | 244,150,073 | 235,379,155 | 222,748,837 | |||||||||||||||
| Deposits |
190,022,742 | 182,097,319 | 172,927,810 | 162,593,492 | 155,493,654 | |||||||||||||||
| Borrowings |
12,697,699 | 16,107,158 | 15,371,801 | 20,584,651 | 19,423,355 | |||||||||||||||
| Debt securities in issue |
14,387,415 | 14,075,084 | 11,984,994 | 11,428,437 | 11,228,600 | |||||||||||||||
| Total equity |
16,488,594 | 16,279,098 | 13,536,965 | 12,781,692 | 12,276,150 | |||||||||||||||
| Capital stock |
2,345,961 | 2,344,038 | 2,342,537 | 2,341,878 | 2,341,274 | |||||||||||||||
| (1) | For the fiscal year ended March 31, 2025, we presented “Net gains (losses) arising from derecognition of financial assets at amortized cost” as a separate line item in the consolidated income statements. This line item was not presented separately in prior years but was included within “Other income” and “Other expenses.” The comparative amounts have been restated to conform to the current presentation. |
| (2) | As resolved by the board of directors on May 15, 2024, we implemented a stock split of our common stock with an effective date of October 1, 2024, whereby each share of common stock owned by shareholders listed or recorded in the closing register of shareholders on the record date of September 30, 2024 was split into three shares. Basic and diluted earnings per share, weighted average number of common shares in issue, and dividends per share are calculated based on the assumption that the stock split had been implemented at the beginning of the fiscal year ended March 31, 2021. |
3.B. CAPITALIZATION AND INDEBTEDNESS
Not applicable.
3.C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
3.D. RISK FACTORS
Investing in our securities involves risks. You should carefully consider the risks described below as well as all the other information in this annual report, including, but not limited to, our consolidated financial
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statements and related notes included elsewhere in this annual report and “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk.” Our business, operating results and financial condition could be adversely affected by any factors, including, but not limited to, those discussed below. The trading prices of our securities could also decline due to any of these factors including, but not limited to, those discussed below. Moreover, this annual report contains forward-looking statements that involve risks and uncertainties. Our actual results could also differ from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, the risks faced by us described below and elsewhere in this annual report. See “Cautionary Statement Regarding Forward-Looking Statements.” Forward-looking statements in this section are made only as of the filing date of this annual report.
Summary
The principal risks that could have a material adverse effect on our business, results of operations, financial condition or capital position include:
Risks Related to the Economic and Financial Environment
| • | Deterioration of Japanese and global economic conditions and financial markets. |
| • | Declines in the value of our securities portfolio. |
| • | Changes in market rates or prices related to financial instruments. |
Risks Related to Our Business
| • | Failure to satisfy capital adequacy requirements. |
| • | Financial difficulties of counterparties and other financial institutions. |
| • | Adverse regulatory developments or changes in government policies. |
| • | Changes in the competitive environment around financial institutions and financial systems. |
| • | Adverse economic conditions affecting our customers and deterioration of their financial condition. |
| • | A significant downgrade of our credit ratings. |
| • | Challenges in achieving the goals of our business strategy. |
| • | Exposure to new risks as we expand the scope of our business. |
| • | Failure of our business strategies through our subsidiaries, affiliates and other business alliance partners. |
| • | Changes in the legal environment for the consumer finance industry. |
| • | The recoverability of deferred tax assets. |
| • | Declines in returns on our plan assets or revised actuarial assumptions for retirement benefits. |
| • | Insufficient liquidity. |
| • | Market price impact and dilution from sales of our shares by us. |
| • | Damage or failure of our information technology systems as a result of various incidents including cyberattacks. |
| • | Fraud, misconduct or other unlawful behavior by directors, officers and employees or third parties. |
| • | Exposure to Iran and other countries and targets that are subject to U.S. or other financial sanctions. |
| • | Natural disasters, terrorism, pandemics and other calamities. |
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| • | Exposure to risks associated with environmental and social issues. |
| • | Inability of our risk management policies and procedures to adequately address unidentified or unanticipated risks. |
| • | Litigation and regulatory proceedings around the world. |
| • | Damage to our reputation. |
| • | Improper development, use or failure of our models. |
| • | Our failure to establish, maintain and apply adequate internal controls over financial reporting. |
Risks Related to Owning Our Shares
| • | Restrictions on U.S. investors’ ability to effect service of process on us or to enforce U.S. court judgments against us. |
Risks Related to Owning Our ADSs
| • | Limitations on rights of holders of our American Depositary Shares (“ADSs”) as shareholders. |
Risks Related to the Economic and Financial Environment
We may be adversely affected if Japanese and global economic conditions and financial markets deteriorate.
Our financial condition and results of operations are materially affected by general economic conditions and financial markets in Japan and foreign countries, which would be influenced by various factors such as monetary policies taken by the Bank of Japan (“BOJ”) and other central banks, and fiscal policies, policies on financial markets, as well as related laws, regulations and agreements adopted by governmental authorities. Those factors include, for example, the increase of tariffs and other protectionist trade policies pursued by the U.S., China and other countries and uncertainty in the path and implementation of such trade policies. Furthermore, geopolitical instability in various parts of the world, including the outbreak or escalation of hostilities or armed conflicts, and material changes in regional trade, economic or political unions or associations between countries could contribute to economic instability in those and other regions. Such regional economic instability could adversely affect Japanese and global economic conditions. Sources of heightened uncertainty include ongoing conflicts in Ukraine and the Middle East, economic and strategic tensions related to East Asia, and the deepening of the real estate crisis in China.
The deterioration of Japanese and global economic conditions, or financial market turmoil, could result in a worsening of our liquidity and capital conditions, an increase in our credit costs, and a decrease in the fair values of our investment securities and, as a result, adversely affect our business, financial condition and results of operations.
Future declines in securities prices on Japanese stock markets or other global markets could cause us to experience realized and unrealized losses on our equity securities portfolio, which could negatively affect our financial condition, results of operations and regulatory capital position.
The value of a listed equity security is measured at its market price. Declines in the Japanese stock markets or other global markets could result in realized and unrealized losses on the securities in our equity securities portfolio, adversely affecting our results of operations and financial condition.
Our regulatory capital position and that of SMBC depend in part on the fair value of our equity securities portfolio. Substantial declines in securities prices on Japanese stock markets or other global markets would negatively affect our and SMBC’s capital positions, and limit SMBC’s ability to make distributions to us.
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Our equity securities portfolio mainly consists of equity instruments at fair value through other comprehensive income. The reported value of our equity instruments at fair value through other comprehensive income accounted for 1.8% of our total assets at March 31, 2025, approximately 65.0% of which were Japanese equity securities. This value depends mainly on prices of the instruments in the stock market. In addition, the reported value, and gross unrealized gains and losses of those equity instruments at fair value through other comprehensive income at March 31, 2025 are described in “Item 5.A. Operating Results—Financial Condition—Investment Securities.”
In recent years, we have been reducing our equity holdings of our customers’ shares (which we refer to as “equity holding investments” herein) in order to mitigate the impact of share price fluctuations on our financial base. Any further disposal by us of equity holding investments could in turn cause our customers to dispose of their equity holdings of investments in us, which could adversely affect the market price of our shares.
Changes in market rates or prices related to financial instruments could adversely affect our financial condition and results of operations.
We engage in trading and investing activities dealing with various kinds of financial instruments such as bonds, equities, currencies, derivatives and funds. For example, we have substantial investments in debt securities. At March 31, 2025, we had ¥11 trillion of Japanese government bonds classified as debt instruments at fair value through other comprehensive income, which accounted for approximately 3.8% of our total assets.
Our financial condition and results of operations could be adversely affected by actual changes or volatility in interest rates, foreign exchange rates and market prices of investment securities. Increases in interest rates could substantially decrease the value of our fixed income portfolio, and any unexpected changes in yield curves could adversely affect the value of our bond and interest rate derivative positions, resulting in lower-than-expected revenues from trading and investment activities. Market volatility may also result in significant realized and unrealized losses on such instruments. Furthermore, the downgrading of investment securities by credit rating agencies may also cause declines in the value of our securities portfolio.
Risks Related to Our Business
Failure to satisfy capital adequacy requirements could constrain our and SMBC’s operations.
We and SMBC are subject to capital adequacy requirements established by the Financial Services Agency of Japan (“FSA”) which are based on the Basel rules text published by the Basel Committee on Banking Supervision (“BCBS”).
The minimum Common Equity Tier 1 risk-weighted capital ratio and minimum risk-weighted capital ratio applicable to us and SMBC have been 4.5% and 8%, respectively, since March 2015. Moreover, we are required to hold a capital conservation buffer to withstand future periods of stress and a countercyclical buffer as additional capital to reduce the buildup of systemic risk in periods and locations of excessive credit growth. The capital conservation buffer has been 2.5% since March 2019. As a result, taking the capital conservation buffer into account at March 2025, the total minimum Common Equity Tier 1 risk-weighted capital ratio has been 7%, and the total minimum risk-weighted capital ratio has been 10.5%. The countercyclical buffer is calculated as the weighted average of the buffers in effect in the jurisdictions to which we have credit exposure, with a maximum of 2.5% from March 2019.
In addition, the requirements for additional capital, in the form of a capital surcharge above the Basel III minimum requirement, have been applied from 2016 to those financial institutions identified by the Financial Stability Board (“FSB”) as Global Systemically Important Banks (“G-SIBs”), including us. This requirement is commonly referred to as the G-SIB capital surcharge. The FSB updates its list of G-SIBs on an annual basis. Based on the list, we have been required to maintain an additional 1% of Common Equity Tier 1 capital as a percentage of risk-weighted assets from 2019.
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G-SIBs are also subject to a global standard for Total Loss-Absorbing Capacity (“TLAC”), which defines certain minimum requirements for total loss-absorbing capacity so that if G-SIBs fail, they will have sufficient loss absorbing and recapitalization capacity available in resolution. In November 2015, the FSB published the final TLAC standards (“FSB’s TLAC Standards”) and, in March 2019, the FSA published its regulatory guidelines and related documents for the implementation of the TLAC standards in Japan (“Japanese TLAC Standards”) which we are subject to as a G-SIB.
Furthermore, under the FSA’s guidelines for the leverage ratio, which have been applied from March 31, 2019, banks and bank holding companies with international operations must maintain a leverage ratio of at least 3% on both a consolidated basis and a nonconsolidated basis for banks and on a consolidated basis for bank holding companies.
In June 2020, the FSA published and implemented amendments to its guidelines for the leverage ratio, which mainly exclude deposits with the BOJ from the denominator for the calculation of the leverage ratio in order to maintain harmonization with the monetary policy implemented by the BOJ and the prudential regulations for banks and other financial institutions. In July 2022, the FSA published amendments to its guidelines for the leverage ratio. Under the amended guidelines, the leverage ratio buffer requirement for G-SIBs in Japan took effect from March 31, 2023, while the finalized definition of the leverage ratio exposure measure took effect from March 31, 2024, except for banks that had notified the FSA that they wished to apply the amended requirements earlier. Furthermore, in November 2022, the FSA published amendments to its guidelines for the leverage ratio, which provided that, effective from April 1, 2024, the minimum leverage ratio was increased from 3% to 3.15%, the minimum leverage-based TLAC ratio was increased from 6.75% to 7.10% and the leverage buffer applicable to G-SIBs was increased by 0.05%, while continuing to exclude amounts of deposits with the BOJ from the total exposure, taking into account exceptional macroeconomic conditions and other circumstances.
At March 31, 2025, on a consolidated basis, our total risk-weighted capital ratio, Tier 1 risk-weighted capital ratio and Common Equity Tier 1 risk-weighted capital ratio were 15.18%, 14.23% and 12.44%, compared to the minimum required ratios of 11.66%, 9.66% and 8.16%, respectively. Such minimum required ratios include the capital conservation buffer of 2.5%, the G-SIB capital surcharge of 1.0% and the countercyclical buffer of 0.16%.
Our and SMBC’s capital ratios could decline as a result of decreases in Tier 1 and Tier 2 capital or increases in risk-weighted assets. The following circumstances, among others, could reduce our risk-weighted capital ratio and that of SMBC:
| • | declines in the value of securities; and |
| • | increases in risk-weighted assets resulting from business growth, strategic investments, borrower downgrades, changes in parameters such as probability of default (“PD”) or regulatory reforms. |
We and SMBC have adopted the advanced internal rating-based (“IRB”) approach for measuring credit risk and the standardized approach by using the internal loss multiplier (“ILM”) for measuring operation risk. If the FSA revokes its approval of our implementation thereof or otherwise changes its approach to measure capital adequacy ratios, our and SMBC’s ability to maintain capital at the required levels may be adversely affected.
In December 2017, the Group of Central Bank Governors and Heads of Supervision (the “GHOS”) endorsed the outstanding Basel III regulatory reforms. The endorsed reforms include the following elements:
| • | a revised standardized approach for credit risk; |
| • | revisions to the internal ratings-based approach for credit risk; |
| • | revisions to the credit valuation adjustment framework; |
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| • | a revised standardized approach for operational risk; |
| • | revisions to the measurement of the leverage ratio and a leverage ratio buffer for G-SIBs; and |
| • | revisions to the capital floor. |
We are subject to the final Basel III reform, as implemented in Japan. See “Item 4.B. Business Overview—Regulations in Japan—Regulations Regarding Capital Adequacy and Liquidity—Capital Adequacy Requirement.”
If our or SMBC’s capital ratios or leverage ratios fall below required levels, the FSA may require us or SMBC to take a variety of corrective actions, including withdrawal from all international operations or suspension of all or part of our operations, which may indirectly affect our ability to fulfill our contractual obligations or may result in restrictions on our businesses. Failure to maintain capital levels under the capital buffer requirements under Basel III and the requirement for the G-SIB capital surcharge or leverage buffer requirements applicable to G-SIBs will result in restrictions on capital distributions, such as dividends, share buybacks, discretionary payments on Additional Tier 1 capital instruments and bonuses. In addition, some of our and SMBC’s domestic and overseas subsidiaries are also subject to local capital ratio requirements. Failure of those subsidiaries to meet local requirements may result in administrative actions or sanctions imposed by local regulatory authorities.
We may incur losses as a result of financial difficulties of counterparties and other financial institutions.
We regularly execute transactions with counterparties in the financial services industry. Many of these transactions expose us to credit risk in the event of deterioration of creditworthiness of a counterparty or client. With respect to secured transactions, our credit risk may be exacerbated when the collateral cannot be foreclosed on or is liquidated at prices not sufficient to recover the full amount of the loan or other exposures due to us. Losses from our investments in and loans to other financial institutions could materially and adversely affect our business, financial condition and results of operations. We may also be requested to participate in providing assistance to distressed financial institutions that are not our subsidiaries. In addition, if the funds collected by the Deposit Insurance Corporation of Japan (“DIC”) are insufficient to insure the deposits of failed Japanese banks, the insurance premiums that we pay to the DIC will likely be increased, which could adversely affect our business and results of operations.
Adverse regulatory developments or changes in government policies could have a negative impact on our results of operations.
Our businesses are subject to extensive regulation and associated regulatory risks, including the effects of changes in the laws, regulations, policies, voluntary codes of practice and interpretations in Japan and the other jurisdictions in which we operate. Those changes and their effects on us are unpredictable and beyond our control.
The Banking Act authorizes the FSA to inspect banks and bank holding companies in Japan at any time and with any frequency. The FSA’s inspection processes are revised or amended from time to time. Our compliance with any such changes could result in an increase in our administrative expenses, which could have an adverse effect on our results of operations and financial condition.
The FSA and regulatory authorities in the United States and other jurisdictions, along with the United Nations and the Financial Action Task Force, have continued to make the prevention of money laundering and terrorism financing a focus of governmental policy relating to financial institutions. In April 2019, SMBC and its New York branch entered into a written agreement with the Federal Reserve Bank of New York requiring SMBC and its New York branch to address certain deficiencies relating to the New York branch’s anti-money laundering and economic sanctions compliance program. SMBC and its New York branch are required, among
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other things, to implement corrective measures and submit periodic progress reports to the Federal Reserve Bank of New York. If we fail to comply with the terms of the written agreement, we may become subject to monetary penalties and other regulatory sanctions, which could have a material adverse effect on us. Further, as a result of the deficiencies identified in the written agreement, we no longer meet the requirements to be treated as a financial holding company, and, pending completion of a remediation plan designed to meet these requirements, we are currently subject to restrictions in our ability to engage in certain new categories of financial activities in the United States and to make acquisitions of companies engaged in activities in the United States. If we fail to correct the conditions giving rise to such restrictions within the prescribed period of time, we may be required to divest or terminate certain business activities in the United States, which could adversely affect our operations and impair our ability to implement our business plans. Although we are committed to improving compliance with laws and regulations relating to anti-money laundering and economic sanctions, we will continue to be subject to ongoing inspection by the regulatory authorities in the United States and other jurisdictions. Any adverse regulatory action or change in regulatory focus, whether as a result of inspections or regulatory developments, may negatively affect our banking operations, cause harm to our reputation, and result in expensive remediation, monetary penalties and other regulatory sanctions.
Regulatory reforms implemented by the Trump administration could adversely affect our capital ratios and results of operations. For further information, see “Item 4.B. Business Overview—Regulations in Japan, Regulations in the United States, and Regulations in Other Jurisdictions.” Since changes in regulation or fiscal or other policies and their effects are unpredictable and beyond our control, we may not be able to comply with those changes at all times, despite our efforts, or may have to incur increased costs or make changes to our operations in order to do so. Any such failures to comply with those changes could result in administrative or judicial proceedings against us, including suspension of our business and financial penalties, which could materially and adversely affect our business, reputation, results of operations and financial condition.
Changes in the competitive and financial environment and financial systems could have a negative effect on the financial services industry and us.
Deregulation of the financial system, consolidation among financial institutions, diversification within the financial services industry, and the expanded presence of foreign financial institutions and investors have made the Japanese financial services market highly competitive. Moreover, competition in overseas markets has intensified due to global consolidation, convergence and alliances among financial institutions. In addition, the development of new technologies in the “Fintech” and other sectors, along with the corresponding rise of new entrants from these sectors into the financial services industry, may further intensify competition in the business environments in which we operate. We compete with various types of financial services companies, including:
| • | banking groups, including Japan’s other major banking groups; |
| • | government-controlled and government-affiliated entities; |
| • | regional banking institutions; |
| • | major investment banks; |
| • | non-bank financial institutions; and |
| • | other firms that are engaged in providing similar products and services. |
Increased competition in Japan may put downward pressure on prices for our financial services, cause us to lose market share or require us to incur additional expenses in order to remain competitive. Internationally, various forms of financial support provided by foreign governments to foreign banks and other financial institutions may reduce the cost of capital to those institutions and otherwise give them competitive advantages. In addition, with technological advances, new competitors in the financial services industry continue to emerge, and as a result, we may be forced to adapt our business to compete more effectively. There can be no assurance that we will be able to respond effectively to current or future competition.
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Changes in the financial environment in Japan may also have a negative effect on the Japanese financial services industry. For example, changes in the monetary policy measures of the BOJ may significantly affect the businesses of commercial banks in Japan, including us. For further information on the BOJ’s monetary policy measures, see “Item 5. Operating and Financial Review and Prospects—Overview—Operating Environment.”
Adverse economic conditions affecting our customers and deterioration of their financial condition could increase our credit costs.
Our non-performing loans (“NPLs”) and credit costs for corporate and individual customers may increase significantly if:
| • | domestic or global economic conditions worsen or do not improve; |
| • | our customers do not repay their loans, due to reasons including deterioration of their financial condition; and |
| • | the value of collateral declines. |
We have substantial exposure to corporate customers in the following sectors: real estate and goods rental and leasing, manufacturing, transportation, communications and public enterprises, wholesale and retail, and services, including electric utilities, and to individual customers mainly through housing loans. The financial condition of those customers may be subject to changes in the industry-specific economic conditions, including, for example, fluctuations in the prices of oil, gas and other natural resources, and the increase in tariffs and other protectionist trade policies, as well as general economic conditions. In addition, adverse region-specific economic conditions or changes in economic conditions due to unexpected incidents such as pandemics, ongoing conflicts in Ukraine and the Middle East and collateral events could worsen our customers’ financial condition or could decrease the value of our collateral provided to us in such regions. As a result, we may be required to record increases in our allowance for loan losses.
Moreover, for certain borrowers, we may choose to engage in debt-for-equity swaps or provide partial debt write-offs, additional financing or other forms of assistance as an alternative to exercising our full legal rights as a creditor if we believe that doing so may increase our ultimate recoverable amount of the loan. We may be required to, or choose to, provide new or additional financing to customers who may incur unexpected liabilities, have difficulty in the future in continuing operations, encounter difficulties or need to devote significant resources to repair their infrastructures, as a result of natural disasters or other calamities.
In addition, changes in laws or government policies may have an adverse impact on the rights of creditors. For example, the Government of Japan has provided or may provide in the future government guarantees and other government support measures in response to the financial crisis or other unexpected incidents such as widespread pandemics, large-scale natural disasters and any subsequent collateral events. Even if our current or future loans to borrowers have received or will receive any government support measures, it is unclear to what extent those loans will benefit, directly or indirectly, from the current or any future government guarantees or support measures.
In addition, our NPLs may increase and there may be additional credit costs if we fail to accurately estimate the expected losses in our loan portfolio. These estimates require difficult, subjective and complex judgments such as credit evaluation of our borrowers, valuation of collateral and forecasts of economic conditions.
The ratio of impaired loans and advances to the total loans and advances, both net of allowance for loan losses, were 0.6%, 0.7% and 0.7% at March 31, 2025, 2024 and 2023, respectively. For further information, see “Item 5.A. Operating Results—Financial Condition—Loans and Advances.”
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A significant downgrade of our credit ratings could have a negative effect on us.
At the date of this annual report, the Company has the issuer ratings of A1/P-1 from Moody’s Japan K.K., the issuer credit rating of A- from S&P Global Ratings Japan Inc. and the foreign and local currency issuer default ratings of A-/F1 from Fitch Ratings Japan Limited. There can be no assurance that these ratings will be maintained.
A material downgrade of our credit ratings may have various effects including, but not limited to, the following:
| • | we may have to accept less favorable terms in our transactions with counterparties, including capital raising activities, or may be unable to enter into certain transactions; |
| • | foreign regulatory bodies may impose restrictions on our overseas operations; |
| • | existing agreements or transactions may be cancelled; and |
| • | we may be required to provide additional collateral in connection with derivatives transactions. |
Any of these or other effects of a downgrade of our credit ratings could have a negative impact on the profitability of our treasury and other operations, and could adversely affect our regulatory capital position, liquidity position, financial condition and results of operations. For further information about our credit ratings, refer to “Item 5.B. Liquidity and Capital Resources.”
We face significant challenges in achieving the goals of our business strategy, and our business may not be successful.
In May 2023, we announced our medium-term management plan through March 2026. We believe that we have targeted appropriate business areas. However, our initiatives to offer new products and services and to increase sales of our existing products and services may not succeed if market conditions do not stabilize, market opportunities develop more slowly than expected, our initiatives have less potential than we envisioned originally or the profitability of these products and services is undermined by competitive pressures. Consequently, we may be unable to achieve or maintain profitability in our targeted business areas.
In order to implement our business strategy successfully, we need to hire and train qualified personnel continuously and in a proactive manner, as well as to attract and retain employees with professional experience and specialized product knowledge. However, we face competition from other commercial banks, investment banks, consumer finance companies and other financial services providers in hiring highly competent employees. There can be no assurance that we will succeed in attracting, integrating and retaining appropriately qualified personnel.
We are exposed to new risks as we expand our businesses, the range of our products and services, and geographic scope of our businesses overseas.
As part of our business strategies, we have expanded and may continue to expand our businesses or our range of products and services beyond our core business, commercial banking. This could expose us to new risks, such as adverse regulatory changes, more competition or deterioration in the operating environments that affect those businesses, products and services. Some of those risks could be types with which we have no or only limited experience. As a result, our risk management systems may prove to be insufficient and may not be effective in all cases or to the degree required.
In accordance with our strategy to further increase our presence in the international financial markets, we may continue to expand the scale of our overseas businesses, especially in emerging economies, notably Asian countries and regions. The expansion of our overseas businesses may further increase our exposure to risks of
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adverse developments in foreign economies and markets, including interest rate and foreign exchange rate risk, regulatory risk, political risk and the risk that foreign assets and capital located in Russia could be seized or nationalized by the Russian government, which has been elevated since the commencement of Russia’s aggression against Ukraine. Our overseas expansion also exposes us to the compliance risks and the credit and market risks specific to the countries and regions in which we operate, including the risk of deteriorating conditions in the credit profile of overseas borrowers.
Failure of our business strategies through our subsidiaries, affiliates and other business alliance partners could negatively affect our financial condition and results of operations, including impairment losses on goodwill or investments.
Aligned with our business strategies, we have made and may undertake acquisitions of subsidiaries, investments in affiliates and other business alliance partners, and reorganization within SMBC Group companies. It is uncertain whether we will receive the expected benefits from those business strategies, due to any adverse regulatory changes, worsening of economic conditions, increased competition or other factors that may negatively affect the related business activities. Furthermore, unanticipated costs and liabilities may be incurred in connection with those business strategies, including liabilities from the claims related to the businesses prior to our business alliances, and cost from actions by regulatory authorities.
When we acquire a subsidiary, we may recognize goodwill and intangible assets. Impairment losses on goodwill or intangible assets in connection with acquisitions must be recognized when the recoverable amount of goodwill or intangible assets of the business is lower than the carrying amount at the time of impairment testing, which is performed annually or whenever there is an indication that the goodwill or intangible assets may be impaired.
We account for some of our investments in affiliates under the equity method. Therefore, net losses incurred by equity method investees may cause us to record our share of the net losses. Furthermore, we may lose the capital which we have invested in business alliances or may incur impairment losses on securities acquired in such alliances. We may also be required under contractual or other arrangements to provide financial support, including credit support and equity investments, to business alliance partners in the future. Additionally, we may also incur credit costs from our credit exposure to such partners.
We are exposed to the industry specific risks of the consumer finance industry.
Changes in the legal environment have severely and adversely affected the business performance of consumer lending and credit card companies. We have exposures to the risks specific to the consumer finance industry through our subsidiaries, including Sumitomo Mitsui Card Company, Limited (“Sumitomo Mitsui Card”), which merged with SMBC Finance Service Co., Ltd. on April 1, 2024, and SMBC Consumer Finance Co., Ltd. (“SMBC Consumer Finance”).
Consumer lending and credit card companies had offered unsecured personal loans, which included loans with so-called “gray zone” interest in excess of the maximum rate prescribed by the Interest Rate Restriction Act (ranging from 15% to 20%) up to the 29.2% maximum rate permitted under the Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates (“Contributions Act”). However, amendments to laws regulating moneylenders, which increased the authority of government regulators, prohibited gray zone interest and introduced an upper limit on aggregate credit extensions to an individual by moneylenders at one-third of the borrower’s annual income, were promulgated in 2006 and became fully effective in June 2010. After the promulgation of such amendments, Sumitomo Mitsui Card, SMBC Consumer Finance and other companies engaged in related business reduced their interest rates on loans in preparation for the prohibition of gray zone interest. As a consequence, margins earned by those companies, as well as the amounts of loans extended, decreased.
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In addition, as a result of court decisions unfavorable to those companies, claims for refunds of amounts paid in excess of the applicable maximum allowed rate by the Interest Rate Restriction Act have continuously occurred. Although Sumitomo Mitsui Card and SMBC Consumer Finance each recorded a provision for claims for refunds of gray zone interest on loans, we may be required to recognize additional losses if such provisions are determined to be insufficient, and the additional losses could have an adverse effect on our results of operations and financial condition.
Inability to generate sufficient future taxable profits or adverse changes to tax laws, regulatory requirements or accounting standards could have a negative impact on the recoverability of certain deferred tax assets.
We recognize deferred tax assets relating to tax losses carried forward and deductible temporary differences only to the extent that it is probable that future taxable profit will be available against which the tax losses carried forward and the temporary differences can be utilized. The deferred tax assets are quantified on the basis of currently enacted tax rates and accounting standards and are subject to change as a result of future changes to tax laws or the rules for computing taxable profits and allowable losses. Failure to generate sufficient future taxable profits or changes in tax laws or accounting standards may reduce our estimated recoverable amount of net deferred tax assets. Such a reduction could have an adverse effect on our financial condition and results of operations.
Declines in returns on our plan assets or revised actuarial assumptions for retirement benefits may adversely affect our financial condition and results of operations.
SMBC and some of our other subsidiaries have various defined benefit plans. We have experienced in the past, and may experience in the future, declines in returns on plan assets and changes in the discount rates and other actuarial assumptions. If returns on plan assets decrease, or if we revise the discount rates and other assumptions, the deficit of the impacted defined benefit plan may increase and adversely affect our financial condition and results of operations. Because approximately half of our plan assets are composed of equity instruments, the plan assets are greatly affected by volatility in the prices of equity securities. Substantial declines in the prices for publicly traded Japanese stocks would negatively affect our plan assets. For further information, refer to Note 24 “Retirement Benefits” to our consolidated financial statements included elsewhere in this annual report.
Our liquidity could be adversely affected by actual or perceived weaknesses in our businesses and by factors we cannot control, such as a general decline in the level of business activity in the financial services sector.
We need liquidity to maintain our lending activities, meet deposit withdrawals, pay our operating expenses and pay interest on and principal of debt and dividends on capital stock. Adverse market and economic conditions in the domestic and global economies may limit or adversely affect our access to liquidity required to operate our business. If our counterparties or the markets are reluctant to finance our operations due to factors including actual or perceived weaknesses in our businesses as a result of large losses, changes in our credit ratings, or a general decline in the level of business activity in the financial services sector, we may be unable to meet our payment obligations when they become due or only be able to meet them with funding obtained on unfavorable terms. Circumstances unrelated to our businesses and outside of our control, such as, but not limited to, adverse economic conditions, disruptions in the financial markets or negative developments concerning other financial institutions perceived to be comparable to us, may also limit or adversely affect our ability to replace maturing liabilities in a timely manner. Without sufficient liquidity, we will be forced to curtail our operations, which could adversely affect our business, results of operations and financial condition.
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Sales of our shares by us may have an adverse effect on the market price of our shares and may dilute existing shareholders.
We may issue shares from the unissued portion of our authorized share capital and sell shares held as treasury stock, generally without a shareholder vote. Sales of shares in the future may be at prices below prevailing market prices and may be dilutive.
Our business relies on our information technology systems, which are at risk of being damaged or failing as a result of various incidents including cyberattacks, and their failure could harm our relationships with customers or adversely affect our provision of services to customers.
In all aspects of our business, we use information technology systems to deliver services to and execute transactions on behalf of our customers as well as for back-office operations. We therefore depend on the capacity and reliability of the electronic and information technology systems supporting our operations. We may encounter service disruptions in the future, owing to failures of these information technology systems. Our information technology systems are at risk of being damaged or failing as a result of quality problems, human errors, natural disasters, power losses, sabotage, acts of terrorism, cyberattacks, malicious use of emerging technologies such as artificial intelligence (“AI”) and similar events.
In particular, cybersecurity risks for financial institutions have significantly increased in recent years. This is partly because of the continuous introduction of new technologies and the use of the internet and telecommunications technologies as well as the elaboration of the cyberattacks, which include computer viruses, malicious code such as ransomware, phishing and other forms of social engineering or other security breaches. Geopolitical tensions may also increase the risk of cyberattacks from foreign governments and state-sponsored actors, for example, cyberattacks in retaliation against the sanctions imposed by the international community caused by Russia’s aggression against Ukraine. As we rely on information technology systems in our business and our receipt and handling of confidential personal information from our customers, any impairment, compromise or destruction of such systems may interfere with, or temporarily prevent us from, continuing our operations. In addition, we also face indirect cybersecurity risks relating to our customers and other third parties, including counterparties in the financial services industry and financial data aggregators. As a result of increasing consolidation, interdependence and complexity of financial entities and technology systems, a technology failure or cyberattack could have a material impact on counterparties or other market participants, including us. Any third-party technology failure or cyberattack could adversely affect our ability to execute transactions or deliver services to our clients effectively. For example, vulnerabilities in third-party technology systems may increase the risk that our information technology systems are exposed to cyberattacks.
Accordingly, we have taken steps to protect information technology systems from these risks, including by establishing data recovery capability and functionality, and to address contingencies that could arise in the event of a major disruption of services. Particularly, we have adopted our “Declaration of Cybersecurity Management” in order to further strengthen our cybersecurity capabilities. In this declaration, our management recognizes cybersecurity as a major management issue and takes a leadership role in implementing measures such as allocating appropriate resources based on discussions at the meetings of the Management Committee and the board of directors, establishing a special department and manual for emergencies and enhancing security measures for our services including internet banking services.
However, these measures may not be sufficient, especially considering the increasing frequency and sophistication of recent cyberattacks. In addition, we may not be prepared to address all contingencies that could arise in the event of a major disruption of services. The failure to address such contingencies could harm our relationships with customers or adversely affect our provision of services to customers.
We handle personal information obtained from our individual and corporate customers in relation to our banking, securities, consumer lending, credit card, asset management and other businesses. The systems we have
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implemented to protect the confidentiality of personal information, including those designed to meet the strict requirements of the Act on the Protection of Personal Information, may not be effective in preventing the disclosure of personal information by unauthorized access from a third party or protecting customers’ data from AI-enhanced threats. Leakage of personal information could expose us to demands for compensation or lawsuits for ensuing economic losses or emotional distress, administrative actions or sanctions, additional expenses associated with making necessary changes to our systems and reputational harm. As a result, our business, financial condition and results of operations could be materially and adversely affected.
Fraud, misconduct or other unlawful behavior by directors, officers and employees or third parties could subject us to losses and regulatory sanctions.
We are exposed to potential losses resulting from fraud, misconduct and other unlawful behavior by directors, officers and employees. Directors, officers and employees may bind us to transactions that exceed authorized limits or present unacceptable risks, hide from us and from our customers unauthorized activities, improperly use confidential information or otherwise abuse customer confidences. Third parties may engage in fraudulent activities, including fraudulent use of bank accounts or the use of false identities to open accounts for money laundering, tax evasion or other illegal purposes. Third parties could also use stolen or forged ATM cards, engage in credit card fraud or transfer funds illegally through online banking fraud, and we may be required to indemnify victims of such fraud for related losses. In the broad range of businesses in which we engage, fraud, misconduct and other unlawful behavior are difficult to prevent or detect. In addition, with or without actual fraud, misconduct and other unlawful behavior by directors, officers and employees, investigations, administrative actions or litigation could commence in relation to them. Furthermore, we may not be able to recover the losses caused by these activities, including possible deterioration of our reputation.
Transactions involving Iran and other countries and targets that are subject to U.S. or other financial sanctions may lead some potential customers and investors to avoid doing business with us or investing in our securities or may limit our business operations.
U.S. law generally prohibits or substantially restricts U.S. persons from doing business with countries, regions and persons that are the subject of sanctions administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) or other agencies (“Restricted Targets” which include Iran, North Korea, Syria, Cuba and the Crimea, Donetsk People’s Republic, and Luhansk People’s Republic regions of Ukraine). Other applicable financial sanctions are administered by the Ministry of Finance of Japan and authorities in other countries.
We maintain a SMBC Group-wide policy designed to ensure compliance with U.S. and other applicable sanctions laws and regulations. Our non-U.S. offices engage in transactions relating to the Restricted Targets in compliance with applicable laws and regulations. These activities include or have included remittance of Japanese yen with respect to our customers’ export or import transactions, maintenance of correspondent banking accounts with Iranian banks, including the Central Bank of Iran, and the payment of fees in Japanese yen to certain Iranian banks in connection with performance bonds issued in the past by SMBC through such Iranian banks related to our customers’ projects in Iran. All such transactions were permissible under applicable laws and regulations at the times they were engaged in. SMBC has discontinued activities that have become impermissible as a result of changes in applicable laws and regulations. See “Item 4.B. Business Overview—Regulations in the United States—Laws Prohibiting Money Laundering and Terrorist Financing—U.S. Sanctions Targeting Iran Related Activities.” The performance bonds expired and have not been renewed, but SMBC continues to be obligated to pay certain fees to the Iranian banks. In addition, we maintain a representative office in Iran that mainly performs an information-collecting function and liaises with non-designated Iranian financial institutions and non-SDN Iranian parties on behalf of our non-U.S. offices.
We do not believe that our operations relating to the Restricted Targets materially affect our business, financial condition or results of operations. A limited number of potential violations of U.S. economic sanctions
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by SMBC have been identified and voluntarily disclosed to OFAC. These transactions resulted from the inherent limitation on information about underlying transactions that can be obtained in the course of normal banking operations, inadvertent operational errors, or from the lack of familiarity of some personnel of SMBC with the requirements of the relevant regulations in the past. We have continuously strengthened our SMBC Group-wide OFAC and other financial sanctions compliance program in an effort to prevent the recurrence of such potential violations. We settled some of the voluntarily disclosed potential violations with OFAC and others were closed without a penalty. However, in light of the inadvertent nature of such potential violations and the degree to which our strengthened compliance program aims to mitigate the risk of potential violations, we do not believe that our settlement with OFAC, or any possible penalties that OFAC may impose with respect to the other potential violations that remain unsettled, will have a material impact on our reputation, financial condition or results of operations, or on the prices of our securities.
We are aware of initiatives by U.S. states and U.S. institutional investors, such as pension funds, to adopt laws, regulations or policies prohibiting transactions with or investment in, or requiring divestment from, entities engaged in certain business with Iran and other Restricted Targets. It is possible that such laws and initiatives may result in our inability to enter into transactions with those entities that are subject to such prohibitions or to retain or acquire such entities as customers or investors in our securities.
Since 2010, the U.S. government implemented a number of sanctions targeting non-U.S. persons for activities undertaken outside the United States (“secondary sanctions”) that involve specific sanctions targets or certain activities including, among other things, certain transactions related to Iran’s energy, petrochemical, shipping and shipbuilding sectors. Certain of these secondary sanctions were temporarily lifted as part of implementation of the Joint Comprehensive Plan of Action (“JCPOA”) in January 2016. However, in 2018, the United States terminated its participation in the JCPOA. All U.S. sanctions (both primary and secondary) that had been waived or lifted under the JCPOA have been re-imposed and are fully effective, and additional sanctions have been put into place in subsequent years. On February 4, 2025, President Trump issued a National Security Presidential Memorandum (NSPM-2) directing U.S. government agencies to impose “maximum pressure” in enforcing Iran-related sanctions, and additional sanctions actions in furtherance of this policy are likely. In accordance with applicable laws and regulations, SMBC intends to provide certain services, including settlement services in connection with customers’ trade transactions between Japan and Iran, to the extent that such activities are permissible under U.S. secondary sanctions. For further information on relevant laws and regulations, see “Item 4.B. Business Overview—Regulations in the United States—Laws Prohibiting Money Laundering and Terrorist Financing.”
In addition, the U.S. government and authorities in several other jurisdictions, including the European Union, the United Kingdom, Japan, Canada, and Australia, have imposed significant sanctions and export control measures targeting Russia in response to Russia’s aggression against Ukraine in February 2022. In broad terms, the U.S. restrictions enacted to date include: territorial embargoes on the Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine, prohibitions on trade in certain goods and services between the United States and Russia and new investment in Russia by U.S. persons, asset blocking sanctions on a number of Russian individuals and entities, restrictions on transactions involving certain Russian financial institutions and Russia’s Central Bank, National Wealth Fund, and Ministry of Finance, and restrictions on dealing in Russian sovereign debt and debt or equity of certain Russian companies. In December 2023, President Biden issued Executive Order 14114, which authorizes the imposition of sanctions on non-U.S. financial institutions that engage in significant transactions involving persons sanctioned by the U.S. government for operating in the technology, defense and related materiel, construction, aerospace, or manufacturing sectors of the Russian Federation economy or involving Russia’s military-industrial base. On June 12, 2024, the U.S. Treasury Department announced that it was broadening the definition of Russia’s military-industrial base to include all persons blocked pursuant to Executive Order 14024, meaning that non-U.S. financial institutions risk being sanctioned for conducting or facilitating significant transactions, or providing any service, involving such blocked persons. While the Trump administration has signaled some openness to easing Russia-related sanctions in connection with efforts to reach a political resolution to the conflict in Ukraine, it is unclear when or if this
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will occur, and it is also possible that additional or expanded sanctions may be imposed in the future. The 2022 and 2023 Russia-related sanctions are in addition to sanctions previously enacted by the U.S. government and other authorities in response to Russia’s 2014 annexation of Crimea, including those under the U.S. Ukraine-/Russia-Related Sanctions Regulations, the U.S. Ukraine Freedom Support Act of 2014, as amended, and “sectoral” sanctions on the financial, energy and defense sectors of the Russian economy.
The U.S. government has imposed targeted sanctions against individuals in China and Hong Kong pursuant to the Hong Kong Autonomy Act and Executive Order 13936, and has also imposed restrictions pursuant to Executive Order 13959, as amended, on transactions by U.S, persons in securities issued by or linked to certain Chinese companies determined to be associated with the Chinese military-industrial complex. Additionally, pursuant to the Global Magnitsky Human Rights Accountability Act and Executive Order 13818, the U.S. government has sanctioned a number of Chinese entities and individuals in connection with China’s actions with respect to the Xinjiang Uyghur Autonomous Region (“Xinjiang”), and published an advisory warning U.S. and non-U.S. companies with supply chain exposure to Xinjiang of reputational, economic, and legal risks of involvement with entities that engage in human rights abuses, including but not limited to forced labor in the manufacture of goods intended for domestic and international distribution. In December 2021, President Biden signed into law the Uyghur Forced Labor Prevention Act, which establishes a rebuttable presumption, effective June 21, 2022, that goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in Xinjiang may not be imported into the United States. In June 2022, U.S. government agencies published additional guidance concerning this restriction and on due diligence best practices. While the sanctions imposed under these authorities to date have not materially impacted our business, it is possible that future sanctions may have a more significant effect on us.
In February 2021, in response to the coup in Burma, President Biden issued Executive Order 14014, authorizing the imposition of targeted sanctions against individuals and entities in Burma. Pursuant to the order, OFAC has added to the SDN List a number of individuals involved in or supporting the coup, family members of such individuals, as well as Burmese state-owned gem, pearl, oil, and lumber enterprises, state holding companies, and certain state-owned banks. If additional sanctions are imposed, it is possible that they could have an adverse impact on the operations of SMBC’s branch in Yangon or on our customers’ business involving entities in Burma.
The laws, regulations and sanctions referenced above or similar legislative or regulatory developments in the U.S., Japan or other jurisdictions where applicable, may further limit our business operations. If we were determined to have engaged in activities targeted by certain U.S. statutes, Executive Orders or regulations, we could lose our ability to open or maintain correspondent or payable-through accounts with U.S. financial institutions, among other potential sanctions. In addition, depending on sociopolitical developments, even though we take measures designed to ensure compliance with applicable laws and regulations, our reputation may suffer due to our association with the Restricted Targets. The above circumstances could have a significant adverse effect on our business or the prices of our securities.
Our business operations are exposed to risks of natural disasters, terrorism, pandemics and other calamities.
Our business operations are subject to the risks of natural disasters, terrorism, pandemics, blackouts, geopolitical incidents and other calamities, any of which could impair our business operations. Despite our preparation of operation manuals and other backup measures and procedures, such calamities could cause us to suspend operations and could adversely affect our businesses, financial condition and results of operations. Large-scale calamities such as the Great East Japan Earthquake of March 2011, the Coronavirus disease 2019 (COVID-19) and any subsequent collateral events, may adversely affect economic conditions in general, the financial condition of our corporate and individual customers and stock market prices, or cause other negative effects, any or all of which could materially and adversely affect our financial condition and results of operations owing to, for example, an increase in the amount of credit-related costs or an increase in losses related to our holdings of securities.
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We are exposed to risks associated with environmental and social issues.
Risks associated with environmental and social issues are subject to increasing societal, regulatory and political focus in Japan and globally. Environmental and social risks, which we define as climate-related risks, nature-related risks and human rights risks, can become drivers of risk that transmit to other categories of risk affecting us as a financial institution, such as credit risk, operational risk, and reputational risk.
Climate-related risks include the physical risks of climate change and risks from the transition to a decarbonized society. In order to address these risks, we have begun efforts to strengthen our climate change scenario analysis and consider countermeasures at the management level. These proposed countermeasures are reported to the Management Committee, risk committee and sustainability committee as internal committees of the board of directors. However, these efforts may not be successful, and even if they are undertaken successfully, they may not be sufficient. In such a case, they may lead to an adverse effect on our financial condition and results of operations.
Physical risks of climate change arise from a number of factors and relate to specific weather events, such as large-scale typhoons. As a result of climate change, the intensity and frequency of extreme weather events have increased. Despite our preparation of operation manuals and other backup measures and procedures, a large-scale disaster due to extreme weather conditions could damage our branches and cause harm to employees, interfering with our business continuity. Large-scale disasters, as well as longer-term changes in weather, temperature and rainfall patterns, could also adversely affect the financial condition and creditworthiness of our customers or the value of properties pledged as collateral, resulting in an increase in our credit costs. In addition, our operating income and values of assets held may decrease due to instability in financial markets, which could also adversely affect our ability to raise financing.
There are also risks from the transition to carbon neutrality and a decarbonized society. For example, due to changes in climate change policies and regulation, technological innovation to address climate change and evolving market conditions, our customers may experience declines in the value of their assets (i.e., asset stranding). In addition, our customers’ financial condition and performance could be adversely affected by increasing costs associated with climate change response measures, which could result in an increase in our credit costs.
Following adoption of the Paris Agreement, governments around the world have made pledges and commitments intended to mitigate the effects of climate change. For example, in October 2020, the Government of Japan announced a net zero greenhouse gas (“GHG”) emissions goal for 2050. In line with these global goals, we have set a number of climate-related targets, including our target to achieve net zero GHG emissions in SMBC Group-wide operations by 2030, our goal to increase the amount of sustainable finance to support our clients’ efforts at addressing climate change and transition, and our aspiration to achieve net zero GHG emissions across our overall investment and loan portfolio by 2050. See “Item 4.B. Business Overview—SMBC Group’s Approach and Initiatives Towards Sustainability—SMBC Group’s Response to Climate Change.”
Progress toward achieving our climate-related targets and pursuing the SMBC Group-wide climate change-related initiatives requires significant investment of resources and management time, and implementation of new compliance and risk management systems, internal controls and procedures. Our ability to achieve our climate-related goals and other sustainability initiatives, which are to be pursued over the long-term, is subject to numerous risks and uncertainties, many of which are outside of our control, such as changes in environmental and energy regulation and policy (which may differ significantly across jurisdictions in which we operate), the pace of technological change and innovation, and the actions of our clients, customers and competitors. If we are unable to achieve our climate-related targets within our stated timeframes or at all, or if our efforts and disclosure regarding climate and sustainability issues are perceived as insufficient or inconsistent with current sentiment or policy attitudes, we may be subject to reputational harm, negative public sentiment, regulatory scrutiny, litigation and reduced investor and stakeholder confidence, which could adversely affect our business and results of operations, as well as the market price of our shares and/or the environment for our capital raising activities.
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Nature-related risks are concerned with potential threats arising from our dependence and influence on nature. For example, damage to natural capital such as plants, animals, air, water and soil, and loss of biodiversity may have adverse consequences such as contributing to the intensity of natural disasters and food insecurity, which could lead to disruptions in economic conditions and financial markets or a deterioration in the financial condition of our customers.
Human rights risks arise from violations of the human rights of stakeholders, including employees of SMBC Group companies, and our customers and our suppliers. We strive to fulfill our responsibility to respect the human rights of all stakeholders. In line with international human rights frameworks such as the United Nations Guiding Principles on Business and Human Rights, we are committed to addressing human rights issues, including through measures such as conducting human rights due diligence in order to identify, prevent and mitigate the negative impact of our business activities on human rights. However, if our due diligence efforts turn out to be insufficient, or SMBC Group companies, our customers or our suppliers are unable to comply with laws and regulations relating to human rights in the regions in which we or they operate, we could face legal and regulatory penalties and sanctions, and any association with known or potential human rights violators, including third parties, could cause reputational harm to our business.
Our risk management policies and procedures may not adequately address unidentified or unanticipated risks.
Our business operations are subject to various laws and regulations across the jurisdictions in which we do business. In addition, we face significant regulatory scrutiny and expectations with respect to, among other things, governance, infrastructure, data and risk management practices and controls.
We have implemented or enhanced SMBC Group-wide risk management programs and program oversight, including compliance risk management. We have also devoted significant resources to strengthening our risk management framework and the policies and procedures thereunder, and expect to continue doing so in the future. Nevertheless, particularly in light of the continuing evolution of our operations and expansion into new areas, our policies and procedures designed to identify, monitor and manage risks may not be fully effective or sufficient.
Furthermore, management of risks requires, especially for compliance risk management, among other things, policies and procedures to properly record and verify large numbers of transactions and events, but deficiencies in the quality or effectiveness of our data gathering, analysis and validation processes could result in ineffective risk management practices and inaccurate reporting. Some of our methods of managing compliance risks are based upon our use of observed historical market behavior and thus may not accurately predict future risks.
Ineffectiveness or insufficiency of our risk management may result in violations of laws including the Japanese antitrust and fair trade laws by us or by SMBC and/or failure to comply with regulatory and supervisory expectations with respect to our compliance function. As a consequence of such violations or failures, we could be subject to regulatory investigations, enforcement actions and legal proceedings, any of which could result in substantial penalties, fines or other sanctions and damage to our reputation.
Our business could be adversely affected by litigation and regulatory proceedings globally.
We conduct business in many locations in and outside of Japan. We face the risk of litigation and regulatory proceedings in connection with our operations. For example, if we engage in activities targeted by certain U.S. sanctions, this could result in the imposition of monetary penalties or other restrictions by the U.S. government against us. Lawsuits and regulatory actions may result in penalties or settlements of very large indeterminate amounts or limit our operations, and costs to defend either could be substantial.
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On October 7, 2022, the FSA announced administrative actions against SMBC Nikko Securities Inc. (“SMBC Nikko Securities”), SMBC and SMFG in relation to findings by the Securities and Exchange Surveillance Commission of Japan (“SESC”) of multiple violations of the Financial Instruments and Exchange Act (“FIEA”). The violations identified by the SESC included, among others, improper stabilization activity and related deficiencies in transaction monitoring and business practices by SMBC Nikko Securities in connection with a series of “block offer” transactions in publicly listed securities (collectively, the “market manipulation conduct”). Separately from the market manipulation conduct, the SESC found that SMBC Nikko Securities committed violations of the so-called “firewall regulations” of the FIEA, in connection with impermissible sharing of customer information between SMBC Nikko Securities and SMBC.
In relation to the market manipulation conduct, a criminal proceeding before the Tokyo District Court (the “Court”) was brought against SMBC Nikko Securities and several of its former officers and employees on allegations of illegal stabilization transactions in violation of the FIEA. On February 13, 2023, SMBC Nikko Securities was convicted of the FIEA violations and sentenced to pay a fine of ¥700 million and to forfeit ¥4,471 million.
The SMBC Group takes the administrative actions of the FSA and the decision of the Court extremely seriously and has striven to implement improvement measures to address the issues identified in the FSA administrative order. We have also taken steps to prevent the reoccurrence of similar violations on a company-wide basis to restore the trust of our customers and other stakeholders. Nevertheless, we have experienced and may continue to experience reputational harm as a result of these regulatory and legal actions, which have resulted and may continue to result in reduced business opportunities with current and prospective clients.
Moreover, SMBC and some of its subsidiaries contribute or used to contribute to financial benchmarks such as the Tokyo Interbank Offered Rate (“TIBOR”) for certain specific currencies. These benchmarks are or were referenced in jurisdictions in which we operate and do not operate. An adverse regulatory decision, judgment or ruling in investigation, litigation and regulatory proceedings that we face or may face, including in jurisdictions we do not operate in, could have a material adverse effect on our business, results of operations and financial condition.
Damage to our reputation may have an adverse effect on our business and results of operations.
Maintaining our reputation is vital to our ability to attract and maintain customers, investors and employees. Our reputation could be damaged through a variety of circumstances, including, among others, fraud or other misconduct or unlawful behavior by directors, officers or employees, systems failures, compliance failures, investigations, adverse litigation judgments or regulatory decisions, or unfavorable outcomes of governmental inspections. Adverse publicity or negative information regarding Japan’s financial services industry or us that may be published or broadcast by the media or posted on social media, non-mainstream news services or other parts of the internet, even if inaccurate or not applicable to us, may have a materially adverse effect on our brand image and undermine depositor confidence, thereby affecting our businesses and results of operations. For example, actual or rumored investigations of us or our directors, officers or employees, or actual or rumored litigation or regulatory proceedings, or media coverage of the same, may have a material adverse effect on our reputation and could negatively affect the prices of our securities. Actions by the financial services industry generally or by certain members in the industry can also adversely affect customers’ confidence on the financial services industry. In addition, investors and other stakeholders have placed emphasis and focus on environmental and social issues, including climate change due to global warming and human rights violations in supply chains. Our reputation may be adversely impacted by negative perceptions of us and our operations in light of these environmental and social concerns, or if we are unable to meet stakeholder expectations in our efforts to address them. Such reputational harm could also lead to a decreased customer base, reduced revenues and higher operating costs.
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Improper development, use or failure of our models may adversely affect our judgments on management and business operations.
We use models in our managerial decisions and business judgments. We define models as quantitative method, system, or approach that applies theories, techniques, and assumptions to process input data into quantitative estimates. The use of models is susceptible to a variety of risks from errors, improper use or design flaws. For example, operational errors in the development or implementation of models, use of models beyond the scope of the assumptions and limitations for the models to work appropriately, or reliance on biased or erroneous outputs generated by AI could lead to errors that can adversely affect managerial decisions and business judgments. We strive to mitigate such risks by implementing proper management of model development and usage. However, an occurrence of deviations between the assumptions built into models and the actual conditions in the economic, financial and business environments, or improper use of models by directors, officers and employees, including failure to understand and validate outputs of AI may increase the output uncertainty of our models and cause us to make erroneous or suboptimal decisions and judgments, which could adversely affect our business and results of operations.
Our failure to establish, maintain and apply adequate internal controls over financial reporting could negatively impact investor confidence in the reliability of our financial statements.
In order to operate as a global financial institution, it is essential for us to have effective internal controls, corporate compliance functions, and accounting systems to manage our assets and operations.
As a New York Stock Exchange (“NYSE”)-listed company and a registrant with the U.S. Securities and Exchange Commission (“SEC”), under section 404 of the U.S. Sarbanes-Oxley Act of 2002 our management is required to assess the effectiveness of our internal control over financial reporting and disclose whether such internal controls are effective. Our independent registered public accounting firm has to conduct an audit to evaluate and then render an opinion on the effectiveness of our internal control over financial reporting. The FIEA also requires companies listed on a Japanese stock exchange, such as us, to file, together with their annual securities reports required by the FIEA, audited internal control reports assessing the effectiveness of their internal controls over financial reporting.
We have established internal controls over financial reporting, as well as rules for evaluating those controls, in order to provide reasonable assurance of the reliability of our financial reporting and the preparation of financial statements. However, these controls may not prevent or detect errors. Any evaluation of effectiveness of future periods is subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. To the extent any issues are identified through the foregoing processes, there can be no assurance that we will be able to resolve them in a timely manner or at all. If this occurs, our reputation may be damaged, which could lead to a decline in investor confidence in us.
Risks Related to Owning Our Shares
It may not be possible for investors to effect service of process within the United States upon us or our directors or senior management, or to enforce against us or those persons judgments obtained in U.S. courts predicated upon the civil liability provisions of the U.S. federal or state securities laws.
We are a joint stock corporation incorporated under the laws of Japan. Almost all of our directors and senior management reside outside the United States. Many of our assets and the assets of these persons are located in Japan and elsewhere outside the United States. It may not be possible, therefore, for U.S. investors to effect service of process within the United States upon us or these persons or to enforce, against us or these persons, judgments obtained in U.S. courts predicated upon the civil liability provisions of the federal or state securities laws. We believe that there is doubt as to the enforceability in Japan, in original actions or in actions to enforce judgments of U.S. courts, of claims predicated solely upon the U.S. federal or state securities laws mainly
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because the Civil Execution Act of Japan requires Japanese courts to deny requests for the enforcement of judgments of foreign courts if foreign judgments fail to satisfy the requirements prescribed by the Civil Execution Act, including requirements that:
| • | the jurisdiction of the foreign court be recognized under laws, regulations, treaties or conventions; |
| • | proper service of process be made on relevant defendants, or relevant defendants be given appropriate protection if such service is not received; |
| • | the judgment and proceedings of the foreign court not be repugnant to public policy as applied in Japan; and |
| • | there exist reciprocity as to the recognition by a court of the relevant foreign jurisdiction of a final judgment of a Japanese court. |
Judgments obtained in U.S. courts, predicated upon the civil liability provisions of the U.S. federal or state securities laws, may not satisfy these requirements.
Risks Related to Owning Our ADSs
As a holder of our American Depositary Shares (“ADSs”), you have fewer rights than a shareholder of record in our shareholder register because you must act through the depositary to exercise these rights.
The rights of our shareholders under Japanese law to take actions such as voting their shares, receiving dividends and distributions, bringing derivative actions, examining our accounting books and records and exercising appraisal rights are available only to our shareholders of record. Because the depositary, through its custodian, is the record holder of the shares underlying the ADSs, only the depositary can exercise shareholder rights relating to the deposited shares. ADS holders will not be able to directly bring a derivative action, examine our accounting books and records or exercise appraisal rights.
Pursuant to the deposit agreement among us, the depositary and the holders and beneficial owners of ADSs, the depositary will endeavor to exercise voting and other rights associated with shares underlying ADSs in accordance with instructions given by ADS holders, and the depositary will also pay to ADS holders dividends and distributions collected from us. However, the depositary is permitted under the deposit agreement to exercise reasonable discretion in carrying out those instructions or in making distributions and is not liable for failure to carry out instructions or make distributions as long as it acts in good faith. Therefore, ADS holders may not be able to exercise voting or other rights associated with the shares underlying ADSs in the manner that they intend or may lose some or all of the value of dividends or distributions collected from us. Moreover, the deposit agreement may be amended or terminated by us and the depositary without any reason, or consent from or notice to ADS holders. As a result, ADS holders may not be able to exercise rights in connection with the deposited shares exercised in the way they wish or at all.
ADS holders are dependent on the depositary for certain communications from us. We send to the depositary most of our communications to ADS holders in Japanese. ADS holders may not receive all of our communications in the same manner as or on an equal basis with shareholders of record in our shareholder register.
| Item 4. | Information on the Company |
4.A. HISTORY AND DEVELOPMENT OF THE COMPANY
Legal and Commercial Name
Our legal name is Sumitomo Mitsui Financial Group, Inc. Our commercial name is Sumitomo Mitsui Financial Group.
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Date of Incorporation
We were established in December 2002.
Domicile and Legal Form
We are a joint stock corporation incorporated with limited liability under the laws of Japan. Our address is: Sumitomo Mitsui Financial Group, Inc., 1-2, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-0005, Japan. Our telephone number is: +81-3-3282-8111.
History and Development
We were established in December 2002 as a holding company for the SMBC Group through a statutory share transfer (kabushiki-iten) of all of the outstanding equity securities of the former SMBC in exchange for our newly issued securities. Upon our formation and completion of the statutory share transfer, the former SMBC became our direct, wholly-owned subsidiary. SMBC was established in March 2003 through the merger of the former SMBC with Wakashio Bank, which was established in 1996 as a subsidiary of Sakura Bank. The former SMBC was established in April 2001 through the merger of Sumitomo Bank and Sakura Bank, which was established through the merger of Taiyo Kobe Bank and Mitsui Bank in 1990. Mitsui and Sumitomo started their banking businesses in 1876 and 1895, respectively. The origins of both banking businesses can be traced back to the seventeenth century.
Information Concerning the Principal Capital Expenditures and Divestitures
In November 2021, we acquired a 74.9% equity interest in Fullerton India Credit Company Limited (“Fullerton India”) for ¥230 billion, which became our subsidiary. Fullerton India has a pan-India distribution network and offers unsecured loans and loans against property to mainly small and medium-sized enterprises and individual customers. Fullerton India changed its name to SMFG India Credit Company Limited in May 2023. Subsequently, in March 2024, we acquired the remaining 25.1% equity interest in SMFG India Credit Company Limited for ¥103 billion and made it our wholly-owned subsidiary.
Public Takeover Offers
Not applicable.
Available Information
The SEC maintains a website at https://www.sec.gov that contains reports and proxy information regarding issuers that file electronically with the SEC. Some of the information may also be found on our website at https://www.smfg.co.jp/english/.
4.B. BUSINESS OVERVIEW
Overview
We are the holding company for the SMBC Group. The SMBC Group is comprised of SMBC, SMBC Trust Bank Ltd. (“SMBC Trust Bank”), Sumitomo Mitsui Finance and Leasing Company, Limited (“SMFL”), SMBC Nikko Securities Inc. (“SMBC Nikko Securities”), Sumitomo Mitsui Card Company, Limited (“Sumitomo Mitsui Card”), SMBC Consumer Finance Co., Ltd. (“SMBC Consumer Finance”), The Japan Research Institute, Limited (“The Japan Research Institute”), Sumitomo Mitsui DS Asset Management Company, Limited (“SMDAM”) and other subsidiaries and affiliates. We are one of the three largest financial groups in Japan and offer a diverse range of financial services, including commercial banking, leasing, securities, consumer finance and other services. Refer to “Item 4.C. Organizational Structure.”
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With the aim of enhancing our corporate group’s brand value, we announced that “SMBC” would be designated as our corporate group’s master brand from April 2018. In line with this change, our corporate group, which was formerly referred to as the “Sumitomo Mitsui Financial Group” or its acronym “SMFG,” is now referred to as the “SMBC Group.” “Sumitomo Mitsui Financial Group” continues to be used as the holding company’s name.
Our Mission, Vision and Values
Our “Mission” is a universal guide for our group management and positioned as the anchor for our corporate action. We also set forth our “Vision” of the mid to long term goals and “Five Values” as the core values to be shared by all executives and employees.
Our Mission, Vision and Five Values are as follows.
Mission
| • | We grow and prosper together with our customers, by providing services of greater value to them. |
| • | We aim to maximize our shareholders’ value through the continuous growth of our business. |
| • | We create a work environment that encourages and rewards diligent and highly-motivated employees. |
| • | We contribute to a sustainable society by addressing environmental and social issues. |
Vision
| • | A trusted global solution provider committed to the growth of our customers and advancement of society. |
Five Values
| • | Integrity: As a professional, always act with sincerity and a high ethical standard. |
| • | Customer First: Always look at it from the customer’s point of view, and provide value based on their individual needs. |
| • | Proactive & Innovative: Embrace new ideas and perspectives, don’t be deterred by failure. |
| • | Speed & Quality: Differentiate ourselves through the speed and quality of our decision-making and service delivery. |
| • | Team “SMBC Group”: Respect and leverage the knowledge and diverse talent of our global organization, as a team. |
SMBC Group’s Approach and Initiatives Towards Sustainability
SMBC Group’s Approach Towards Sustainability and Our Priority Issues
The world is currently facing a range of environmental and social issues, for example, climate change due to global warming, nature loss, human rights violations in supply chains, and widening poverty and inequality. In response to these environmental and social challenges, the public and private sectors have implemented various initiatives aimed at realizing a sustainable society, with growing interest in environmental, social, and governance investing.
We define sustainability as “creating a society in which today’s generation can enjoy economic prosperity and well-being, and pass it on to future generations” so that we can contribute to solving social issues and create a better society.
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Based on the mindset above, our current medium-term management plan aims to achieve fulfilled growth through the creation of economic and social value. We have designated “Environment,” “DE&I/Human Rights,” “Poverty & Inequality,” “Declining Birthrate & Aging Population,” and “Japan’s Regrowth” as our priority issues.
Governance
Our sustainability management is promoted under the responsibility of CxOs, including the Group Chief Executive Officer (“CEO”), and is operated through a robust governance structure under the supervision of the board of directors. Measures for the realization of SMBC Group-wide sustainability and creating social value are subject to discussion at the Management Committee level. In addition, specific contents of our sustainability measures are deliberated upon and determined by the Corporate Sustainability Committee, which is chaired by the Group CEO. In order to implement these measures, the Group Chief Sustainability Officer (“CSuO”), as part of the group CxO framework, oversees and promotes our sustainability-related initiatives. Furthermore, we have incorporated qualitative and quantitative indicators related to sustainability initiatives into executive compensation schemes to accelerate sustainability management. See “6.E. Share Ownership—Stock Option Plans and Other Remuneration for Directors and Senior Management—Compensation Plans Utilizing Restricted Stock” for further information on executive compensation plans.
Our sustainability management is supervised by the board of directors, which consists of directors with various backgrounds, including those with expertise in sustainability. In addition, the sustainability committee, which is an internal committee of the board of directors, deliberates with and gives advice to the board of directors on the progress of our sustainability initiatives, global sustainability trends, and other matters related to sustainability.
Strategy
SMBC Group’s Response to Climate Change
The imperative to address climate change concerns continues to grow especially since the adoption of the Paris Agreement. In October 2020, the Government of Japan announced a net zero greenhouse gas (“GHG”) emissions goal for 2050, committing to achieving a transition toward a decarbonized society. Given these circumstances, we aim to reduce GHG emissions in line with the goals of the Paris Agreement and to support the activities of our customers contributing to the transition toward and realization of a decarbonized society.
Awareness of Risks Associated with Climate Change. We organize the transmission channels of climate change risk into physical and transition risks. We conduct climate scenario analysis for sectors that are expected to experience large impacts from climate change, quantify the financial impacts, and calculate portfolio GHG emissions. We share the risk awareness obtained through these processes and reflect it in our strategies. We have identified climate change risk as part of our Top Risks, which are risks that threaten to significantly impact management, and conducted scenario analyses of physical and transition risks while also introducing policies on businesses and sectors that are likely to have a significant impact on climate change. See “Item 3.D. Risk Factors—Risks Related to Our Business—We are exposed to risks associated with environmental and social issues.”
Physical risks consider how acute meteorological phenomenon and chronic climate change can directly damage physical assets or otherwise impact their value or productivity. The progress of global warming may lead to an increase in acute natural disasters such as typhoons and floods, and chronic climate changes such as an increase in precipitation due to a rise in average temperature. Accordingly, there are risks that we become unable to continue our business operations due to a disaster that strikes our head office or branch offices and a risk of increased costs due to disaster countermeasures and damage recovery. In addition, there are risks such as an increase in our credit costs and a decrease in deposits associated with a deterioration in customer performance and collateral damage due to natural disasters. Moreover, our operating income and values of assets held may decrease due to instability in financial markets, which could also adversely affect our ability to raise financing.
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Transition risks consider how strengthening of policies, laws and regulations and changes in technologies and markets can lead to changes in the value of assets, commodities and companies. The transition to a decarbonized society is resulting in a push for tighter regulations at the national and international levels, including stricter carbon emission targets and carbon tax schemes, and may also promote transformation in the industrial structure due to the introduction of new technologies and energy sources and changes in consumer preferences. An increase in carbon emission control costs and changes in the supply and demand balance for products and services cause a deterioration in customer performance due to a revenue decline and impairment of existing assets for some customers, and as a result, there is a risk of an increase in our credit costs. Growing demand for disclosure from stakeholders and efforts to address climate change are becoming one of the criteria for evaluation of companies. Lack of efforts to address climate change and delays in responding to demand for information disclosure may lead to a deterioration of our reputation, and, as a result, there is a risk of deterioration in our funding environment.
Awareness of Opportunities Associated with Climate Change. In order to address climate change, society at large may face the transformation of business models, technological innovation, and large-scale equipment investment. Moreover, the Ministry of Economy, Trade, and Industry’s “Green Growth Strategy Through Achieving Carbon Neutrality by 2050” states that digital transformation is indispensable for achieving net zero. Additionally, as society’s demand for decarbonization intensifies, expansion of the carbon credit market is also anticipated.
Given these circumstances, we understand that businesses will face increasing needs for capital, business restructuring, new financial products or services, leasing of decarbonization-related equipment, and consulting on management issues. These issues may include advanced responses to climate-related information disclosure, formulation of climate change strategies and visions, business development, and enhanced risk management. There will also be a demand for matchmaking between companies holding decarbonization technologies and customers who require them, digital solutions, and carbon credit procurement. We believe that we will see an increase in opportunities to provide various financial services and that it will be crucial to offer multifaceted solutions that organically connect expertise in different business areas within our group.
We are committed to addressing these complex needs of our customers. We strive to provide support from both financial and non-financial perspectives, utilizing collaborations not only within our group but also with external partners.
Transition Plan. We aim to achieve net zero for our own GHG emissions by 2030, and for our entire loan and investment portfolio by 2050. Our “Transition Plan” is a systematized series of goals and actions to achieve decarbonization. By executing the Transition Plan, we strive to reduce transition risks facing us and our customers and expand growth opportunities associated with decarbonization. See “Item 3.D. Risk Factors—Risks Related to Our Business—We are exposed to risks associated with environmental and social issues.”
SMBC Group’s Response to Natural Capital
Natural capital refers to natural resources such as plants, animals, the atmosphere, water and soil. As the goal of “Nature Positive,” which aims to halt and restore the loss of natural capital, continues to grow in importance for global environmental conservation, the SMBC Group is focusing on supporting our customers’ efforts and strengthening our own initiatives.
To achieve “Nature Positive,” our customers are expected to have diverse needs, such as transforming their business models, introducing new technologies, making capital investments with low environmental impact.
In response, we believe these will bring about opportunities for us to provide financial services to meet the various needs of our customers.
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On the other hand, since many of the business activities of our customers are supported by natural capital, the loss of natural capital may have potential impacts on a wide range of business activities we conduct as a financial group.
With this understanding, we analyze the relationships between our customers’ business activities and natural capital from the perspectives of dependency and impact and identifying opportunities and risks for our group, based on which we implement various countermeasures.
Human Capital Investment
Recently, the workplace has witnessed greater diversity in employee values, brought on through changes in the management and business environment. In order for SMBC Groups’ environment to continue being a place where our varied employees can grow and thrive with a sense of unity, our “SMBC Group Talent Policy,” established in April 2023 clearly identifies both “what we expect our employees to be” and our “Employee Value Proposition.” Our employees are expected to “Carry out their responsibilities as professionals,” “Respect others and pursue the best results as a team,” and “Carry on, stay bold even if challenging.” We provide an environment in which employees can express their individuality, contribute to customers and the greater society by leveraging our business foundations, and gain support in their career development and growth.
In accordance with the “SMBC Group Talent Policy,” we aim to advance measures that contribute to “Creating a human resources portfolio that supports our strategy,” “Supporting employee growth and wellbeing” and “Maximizing team performance,” and to maximize human resources capabilities through group and global human capital management. Maximizing human resource capabilities while pursuing both management strategy and employees’ aspirations attests to achievement of our management philosophy, together with the creation of both economic and social values.
Creating a Human Resources Portfolio that Supports Our Strategy. To create a human resources portfolio that supports our strategy, including our medium-term management plan, we are reallocating our human resources and proactively hiring new employees.
We are focused on attracting, developing, retaining, and promoting talented individuals who will lead the SMBC Group regardless of the location of hire.
We formulate succession plans for each key management position and establish a framework for their evaluation and treatment, regardless of age or seniority.
Supporting Employee Growth and Wellbeing. To support employees’ self-directed career development, we provide our internal job posting system for applying to positions across SMBC Group companies and regularly hold “job forums,” which are explanatory sessions to communicate the appeal of departments.
Several of our subsidiaries have issued a “Health and Productivity Management Declaration” and are working to create a safe and healthy work environment to maximize employee performance.
Maximizing Team Performance. We aim to provide customers with greater value by enabling employees with varied backgrounds to maximize their capabilities and thus enhance our team performance.
We conduct regular organization-wide employee surveys to visualize the employees’ engagement levels and the organizational culture in order to build a highly engaged organization. We analyze the accumulated data to identify organizational issues and improve initiatives. We also work to enhance employee engagement and performance by setting up regular dialogues and one-on-one opportunities.
We actively invest in management education at every level of employees, from mid-level to the officer level.
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Initiatives Regarding Respect for Human Rights
We recognize that respecting human rights is a fundamental responsibility for businesses. We adhere to the international frameworks, such as “UN Guiding Principles on Business and Human Rights.” By considering the potential negative impacts our group may have on human rights holders, as well as the diverse impacts we may face from various stakeholders, we aim to contribute to the realization of a sustainable society through a comprehensive approach to human rights risks.
Risk Management
Environmental and social factors, such as climate change, natural capital, and human rights may act as risk drivers and potentially negatively impact our business. We are incorporating these environmental and social risks into our company-wide risk management and working to enhance our risk analysis and management processes.
Top Risk and Risk Appetite Framework
We have identified climate change as part of our Top Risks, which are risks that threaten to significantly impact management, and conducted scenario analyses of physical and transition risks. For information on environmental and social risks, see “Item 3.D. Risk Factors—Risks Related to Our Business—We are exposed to risks associated with environmental and social issues.”
Further, climate-related risks are integrated into the Risk Appetite Framework, which functions as a management framework for sharing information on the operating environment and risks facing the SMBC Group among management and for facilitating appropriate risk-taking based thereon. For further information on our risk management framework, see “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk—Quantitative and Qualitative Information about Risk Management—Risk Appetite Framework.”
Cross-sectoral and Cross-business Policies
We have established policies for specific businesses and sectors to appropriately identify and manage environmental and social risks. In the policies, we clarify sectors that require special attention when providing support.
Description of Operations and Principal Activities
Wholesale Business Unit
The Wholesale Business Unit provides comprehensive solutions primarily for corporate clients in Japan that respond to wide-ranging client needs in relation to financing, investment management, risk hedging, settlement, M&A and other advisory services, digital services and leasing services. This business unit mainly consists of the wholesale businesses of SMBC, SMBC Trust Bank, SMFL, SMBC Nikko Securities and Sumitomo Mitsui Card, which merged with SMBC Finance Service Co., Ltd. (“SMBC Finance Service”), formerly a wholly-owned subsidiary of Sumitomo Mitsui Card, on April 1, 2024.
Financing and Investment Management
The Wholesale Business Unit provides financing services that include bilateral loans, syndicated loans, commitment lines, structured finance, project finance, nonrecourse loans to and investments in corporate customers directly or through private equity funds, securitization, debt and equity underwriting and corporate bond trustee and registrar services.
The Wholesale Business Unit also provides investment management services such as deposits and investment trusts. In addition, this business unit offers a wide range of securities products to corporate clients through SMBC and SMBC Nikko Securities.
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Risk Hedging
The Wholesale Business Unit provides various risk hedging services including forward exchange contracts and derivatives to meet our customers’ demand for hedging risks such as interest rate risk or foreign exchange rate risk in their transactions. This business unit also provides guarantee services including stand-by credit, performance bond and credit guarantee services.
Settlement
The Wholesale Business Unit offers a variety of products and services including remittance, cash management, trade finance for export and import activities and supply chain finance to optimize customers’ cash flows and business flows.
In addition, this business unit provides comprehensive settlement services including credit card issuing, merchant acquiring, collection outsourcing and factoring services for corporate customers through Sumitomo Mitsui Card.
M&A and Other Advisory Services
The Wholesale Business Unit responds to customers’ diversifying business strategies and management issues by providing solutions custom-tailored to their business characteristics and growth stage.
The Wholesale Business Unit caters to large corporate clients in their global business activities by leveraging the collective strength of SMBC Group companies. For example, SMBC and SMBC Nikko Securities support the entire deal process of cross-border M&A projects on a collaborative basis.
For mid-sized companies and small and medium-sized enterprises, the Wholesale Business Unit provides a wide range of financial services including direct investment, LBO financing, debt restructuring, support for initial public offering and M&A advisory to enhance our customers’ corporate value, working in conjunction with private equity funds as necessary. In real estate and related businesses, this business unit provides a full lineup of services including brokerage and asset management by SMBC Trust Bank and funding support mainly by SMBC.
For start-up companies, the Wholesale Business Unit offers support in accordance with clients’ stage of growth such as management consulting, venture investment, financing and support for initial public offerings.
For clients considering business overseas, the Wholesale Business Unit provides tailored information on local laws and regulations and on Japanese companies already present in target countries. For clients who already have business overseas, each SMBC Group company collaborates to provide high quality solutions in areas such as business expansion and reorganization.
Digital Services
The Wholesale Business Unit supports customers’ digitalization and new business creation efforts, reflecting growing needs for our customers’ digital innovation and digital transformation not only among large enterprises but also among mid-sized companies and small and medium-sized enterprises. For example, this business unit provides tailor-made solution proposals, corporate digital platform services, cashless payments and online business matching services.
Leasing
The Wholesale Business Unit provides a wide range of leasing services including equipment, operating and leveraged leasing mainly through SMFL, one of the major leasing companies in Japan. We have a 50% equity interest in SMFL while the remaining 50% is held by Sumitomo Corporation (“Sumitomo Corp”), a non-affiliate, which makes SMFL our joint venture with Sumitomo Corp.
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Retail Business Unit
The Retail Business Unit provides financial services to consumers residing in Japan and mainly consists of the retail businesses of SMBC, SMBC Trust Bank, SMBC Nikko Securities, Sumitomo Mitsui Card and SMBC Consumer Finance. This business unit offers a wide range of products and services for consumers, including wealth management services, settlement services, consumer finance and housing loans, in order to address the financial needs of all individual customers.
Wealth Management
The Retail Business Unit offers a variety of wealth management services to high-net-worth customers as well as customers with needs for asset building in the mass affluent and mass segments. The financial products and services that this business unit offers include deposit products such as time deposits and foreign currency deposits, investment trusts, equities, bonds, insurance products and trust services.
In order to meet high-net-worth customers’ diverse needs for asset management, including asset succession, SMBC, SMBC Trust Bank and SMBC Nikko Securities are promoting greater collaboration by leveraging SMBC’s broad client base and high advisory capabilities of SMBC Trust Bank and SMBC Nikko Securities. In addition, we are appointing dedicated staff to high-net-worth customers to give them access to outstanding advice and service.
Settlement
The Retail Business Unit conducts credit card, installment and transaction businesses and provides customers with secure and convenient payment methods and offers a variety of settlement and finance services to meet diverse customer needs through Sumitomo Mitsui Card.
Sumitomo Mitsui Card is a leading company in Japan’s credit card industry, having introduced the Visa brand into the Japanese market, and issues a variety of affiliated credit cards in cooperation with partners including, but not limited to, railway companies, airline companies, department stores and online retailers to satisfy both these partners’ and cardholders’ needs. Sumitomo Mitsui Card, together with GMO Payment Gateway, Inc. and Visa Worldwide Japan, Co., Ltd., also provides a next generation payment platform that enables one-stop support for multiple payment methods on a single device. Sumitomo Mitsui Card conducts credit card, installment (such as shopping credit and automobile loans) and solution (such as collection outsourcing and factoring) businesses.
SMBC and Sumitomo Mitsui Card are leveraging their strengths to address cashless payment needs and integrate marketing and business operations.
On April 1, 2024, Sumitomo Mitsui Card merged with SMBC Finance Service which had been Sumitomo Mitsui Card’s wholly-owned subsidiary and conducted credit card, installment (such as shopping credit and automobile loans) and solution (such as collection outsourcing and factoring) businesses. This merger was made for the purpose of enhancing the overall strength of the companies and accelerating our group’s initiatives for cashless payment strategy to address all payment needs of both consumers and merchants.
Consumer Finance
The Retail Business Unit offers a variety of consumer loan products including unsecured card loan products mainly through SMBC, Sumitomo Mitsui Card and its wholly-owned subsidiary, SMBC Consumer Finance, to meet the wide range of individual customers’ demand for funds. Also, SMBC Consumer Finance guarantees certain consumer loans made by SMBC and other financial institutions.
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In April 2023, Sumitomo Mitsui Card acquired all shares of SMBC Mobit Co., Ltd. from SMBC Consumer Finance and made it a wholly-owned subsidiary and subsequently, in July 2023, Sumitomo Mitsui Card merged with SMBC Mobit Co., Ltd. This reorganization was made in anticipation of a merger to strengthen our response to the settlement driven financing needs associated with customer purchases, which are expected to continue to grow along with the growth of the cashless market in Japan.
Housing Loans
The Retail Business Unit provides housing loans with a variety of terms and interest rates to meet diversified customer needs. Furthermore, this business unit offers a housing loan combined with an insurance policy that covers the repayment of the outstanding loan balance in the event the borrower is diagnosed with certain diseases. Housing loans are principally secured by collateral or supported by guarantees.
The Retail Business Unit operations are mainly conducted through a large and well-developed branch network. We had a domestic network consisting of 455 SMBC branch offices, 26 SMBC Trust Bank branch offices, 105 SMBC Nikko Securities branch offices and 300 SMBC Consumer Finance unstaffed branch offices at March 31, 2025. For the convenience of individual customers, some SMBC branches operate on weekday evenings and provide wealth management services through arranging consultation sessions on weekends and national holidays. Further, consumer loan promotion offices of SMBC offer housing loan consultation on weekends and national holidays.
The Retail Business Unit also operates an extensive network of ATMs in Japan. SMBC offers its customers’ access to ATMs, some of which are SMBC’s ATMs and the majority of which are ATMs made available through arrangements with other ATM providers such as convenience store chains. At March 31, 2025, the number of SMBC’s ATMs was 3,943. In addition, SMBC Consumer Finance offers its customers’ access to 619 automatic contract machines and ATMs at March 31, 2025.
This business unit also offers internet banking services for consumers. At March 31, 2025, SMBC’s internet banking services had approximately 22 million registered users. The users are able to transfer funds, perform balance inquiries, make time deposits and foreign currency deposits, and buy and sell investment trusts over the internet with smartphones and computers.
Moreover, in the credit card business, there are approximately 39 million card holders of Sumitomo Mitsui Card at March 31, 2025.
The Retail Business Unit is pursuing services tailored to the changing needs and behaviors of our customers by increasing the number of procedures that can be completed digitally or remotely, and expanding digital tools. In addition, through the development of joint branches shared by SMBC, SMBC Nikko Securities, and SMBC Trust Bank, we provide a one-stop service and achieve both greater convenience for customers and more efficient branch operations.
The Retail Business Unit promotes digitalization in a variety of areas, including the promotion of the use of debit cards and credit cards that address cashless payment needs, a smartphone application that allows our customers to easily and seamlessly view information on transactions with SMBC and Sumitomo Mitsui Card, and an automated chat service utilizing artificial intelligence. In March 2023, we launched a new digital financial service, “Olive,” allowing retail customers to seamlessly access various financial services such as banking services, payment services, finance services, securities services and insurance services through our smartphone application. SMBC is developing the “STORE,” which is a new kind of physical store branch, where customers can handle day-to-day procedures at their convenience, in easily accessible commercial facilities. At the “STORE,” customers can handle various procedures, such as updating their bank account information, by using devices which are connected to our call center during extended hours, including weekday evenings, weekends and national holidays.
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Global Business Unit
The Global Business Unit supports the global businesses of a diverse range of clients, such as Japanese companies operating overseas, non-Japanese companies, financial institutions, government agencies, public corporations and retail clients of various countries. This business unit mainly consists of the global businesses of SMBC, SMBC Trust Bank, SMFL, SMBC Nikko Securities and their foreign subsidiaries. At March 31, 2025, we have a global network of 146 overseas offices.
Banking Business
The Global Business Unit provides a variety of tailored products and services to meet customer and market requirements, including loans, deposits, clearing services, trade finance, project finance, loan syndication, derivatives and global cash management services.
SMBC seeks to meet customers’ needs globally, together with the network of our foreign subsidiaries such as SMBC Bank International plc, Sumitomo Mitsui Banking Corporation (China) Limited, PT Bank SMBC Indonesia Tbk (which changed its corporate name from PT Bank BTPN Tbk in October 2024), SMBC MANUBANK (which changed its corporate name from Manufacturers Bank in November 2023), SMBC Bank EU AG, SMFG India Credit Company Limited and our foreign associates, including ACLEDA Bank Plc, Vietnam Prosperity Joint-Stock Commercial Bank and VPBank SMBC Finance Company Limited.
In November 2021, we acquired a 74.9% equity interest in Fullerton India, which became our subsidiary. Fullerton India has a pan-India distribution network. This acquisition was made in order to gain a retail finance platform in India and further expand our business franchise in Asia. Fullerton India changed its name to SMFG India Credit Company Limited on May 11, 2023. Subsequently, in March 2024, we acquired the remaining 25.1% equity interest in SMFG India Credit Company Limited and made it our wholly-owned subsidiary.
In April 2022, SMBC Bank EU AG merged with our securities business subsidiary in Germany, SMBC Nikko Capital Markets Europe GmbH. The merger enables us to offer banking and securities products to our customers through a single entity providing a full range of financial services in the European Union.
In July 2023, to build a platform for the U.S. retail business and sustain growth in the U.S. operations, SMBC MANUBANK launched the “Jenius Bank,” a digital-based retail banking business which began offering personal loans and savings accounts to U.S. residents.
In October 2023, SMBC acquired a 15.0% equity interest in Vietnam Prosperity Joint-Stock Commercial Bank, a commercial bank in Vietnam. As a result, Vietnam Prosperity Joint-Stock Commercial Bank became our associate.
Securities and Derivatives Business
In overseas markets, the Global Business Unit provides services such as equity and fixed income sales and trading, underwriting activities, Japanese stock brokerage, M&A advisory and derivatives through SMBC Nikko Capital Markets Limited, SMBC Bank EU AG, SMBC Nikko Securities America, Inc., SMBC Capital Markets Inc. and SMBC Capital Markets (Asia) Limited, which are subsidiaries of SMBC in Europe, Middle East and Africa, the United States and Asia. In addition, this business unit provides services such as equity and fixed income sales and trading, underwriting activities, Japanese stock brokerage and M&A advisory services through SMBC Nikko Securities (Hong Kong) Limited and SMBC Nikko Securities (Singapore) Pte. Ltd. Together with other SMBC Nikko Securities’ subsidiaries and affiliates, this business unit offers high quality financial services to clients on a global basis. Further, we have been strengthening strategic capital and business alliances with Jefferies Financial Group, Inc., a U.S. general securities firm, and expanding the business and regions covered by the collaboration.
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Leasing Business
The Global Business Unit provides a variety of leasing services related to the construction machinery, transportation equipment, industrial machinery, medical equipment and other categories mainly through SMFL’s offices overseas. This business unit also offers aircraft leasing services through SMBC Aviation Capital Limited, a subsidiary of SMFL.
In December 2023, we transferred our entire interest in SMBC Rail Services LLC, our railcar operating leasing subsidiary in the United States, to a non-affiliate investment company. As a result, SMBC Rail Services LLC is no longer our subsidiary.
Global Markets Business Unit
The Global Markets Business Unit offers solutions through foreign exchange products, derivatives, bonds, stocks and other marketable financial products, and also undertakes asset liability management operations, which help comprehensively control balance sheet liquidity risks and market risks. This business unit consists of the Global Markets and Treasury Unit of SMBC, which was renamed from the Treasury Unit in April 2023 and the Global Markets Division of SMBC Nikko Securities.
Asset Liability Management and Portfolio Management
The Global Markets Business Unit maintains high profitability and stability by establishing a portfolio with highly liquid products and focusing on products for which investment appetite is high, and by carrying out portfolio rebalancing in a nimble and dynamic manner in response to changes in market conditions.
Foreign Currency Funding
To support our overseas businesses, this business unit strives to improve the stability of our foreign currency funding by diversifying funding methods and expanding the scope of investors we target. At the same time, this business unit keeps appropriate control of the balance sheet in response to international financial regulations.
Sales and Trading
The Global Markets Business Unit provides detailed information on market conditions and economic trends to address customers’ hedging and asset management needs, expands its product lineup in foreign exchange, derivative, bond, stock and other products and supplies timely solutions to increase customer satisfaction and SMBC Group earnings.
In addition, this business unit encourages the use of electronic transactions such as its electronic foreign exchange execution platform available via the internet to respond to the needs of a wider range of customers.
Other Major Business
System Development, Data Processing, Management Consulting and Economic Research
We provide financial consultation services relating to management reforms, IT, the planning and development of strategic information systems and outsourcing. We also conduct diverse activities including domestic and international economic research and analysis, policy recommendations and business incubation. We offer these services mainly through The Japan Research Institute.
Asset Management
We provide mutual funds and investment management services such as alternative investment strategy, customized portfolio products, and active investment strategy for a wide range of investors in order to aim to achieve sustainable long-term growth through SMDAM and TT International Asset Management Ltd.
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Management Policies
In May 2023, we announced our new medium-term management plan, “Plan for Fulfilled Growth” for the three-year period through March 2026. In the medium-term management plan, we aim to realize “Growth with Quality” by addressing the paradigm shift in our business environment and further evolving our initiatives by leveraging our consolidated capabilities.
In order to realize “Growth with Quality,” we added the “Create Social Value” as a pillar of our corporate philosophy and seek to lead in addressing social issues. We aim to balance economic growth with the resolution of social issues, therefore contributing to “Fulfilled Growth.” We also seek to create economic value by exponentially strengthening profitability that is accompanied by enhanced capital efficiency by engaging in the bold reallocation of management resources and carrying out our respective initiatives in a speedy manner. We aim to significantly rebuild our corporate infrastructure in order to win the trust of our customers and other stakeholders which forms the basis of our various activities. “Plan for Fulfilled Growth,” the title of our new medium-term management plan, illustrates our strong commitment to contributing to “Fulfilled Growth” through our three core policies of “Create Social Value,” “Pursue Economic Value,” and “Rebuild Corporate Infrastructure.”
Create Social Value: Contribute to “Fulfilled Growth”
We designated “Environment,” “DE&I/Human Rights,” “Poverty & Inequality,” “Declining Birthrate & Aging Population,” and “Japan’s Regrowth” as our priority issues. With the aim of addressing these priority issues, we will further expand Group-based activities to create social value and to return the said value to society. Through such efforts, we aim to contribute to the realization of “Fulfilled Growth” where all of society and humanity can enjoy sustained prosperity, as well as the generation of economic growth. We further encourage the participation of our employees in the creation of social value so that they feel pride and satisfaction in their responsibilities by proactively engaging in our priority issues.
Pursue Economic Value: Transformation & Growth
In continuation from the previous medium-term management plan, we positioned “Transformation & Growth” as a key phrase and engage in continuous business model reform which reflects major changes in the environment and carry out efforts to establish franchises in strategic overseas areas while steadily realizing the benefits of existing growth investments and initiatives. Through these efforts, we aim to transform our business portfolio and realize robust growth in profitability that is accompanied by enhanced capital efficiency. We established key strategic areas based on the following three perspectives in response to changes in our business environment.
| • | In our domestic business, taking into consideration the potential for future interest rate hikes, we seek to build a more stable and efficient business model by expanding our client business in a more effective manner through efforts such as the expansion of digitalization, enhancing our payment business, and revising our marketing framework. |
| • | We seek to enhance our capital efficiency by not relying solely on the expansion of our balance sheet, but by also offering a diverse range of risk solutions and enhancing our fee business. |
| • | In our overseas business, we seek to realize robust growth that drives the growth of the entire SMBC Group through our business in the United States and by establishing a second and third franchise in Asia through our “Multi-Franchise Strategy” while at the same time enhancing capital efficiency by replacing the contents of our portfolio. |
Rebuild Corporate Infrastructure: Quality builds Trust
We positioned “Quality builds Trust” as a key phrase and aim to engage in tireless efforts to enhance our corporate infrastructure and win the trust of our customers and other stakeholders. We prioritize the further
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embedment of a sound corporate culture and the enhancement of our governance and compliance capabilities. These are all key prerequisites to conducting a successful business. We seek to carry out, on an SMBC Group basis, initiatives to strengthen the regulatory awareness of our employees and the enhancement of internal controls through investments in IT and personnel deployment. Furthermore, in order to realize resilient operations in an uncertain business environment, we aim to work to enhance our risk analysis and risk control capabilities. In addition, with the goal of expanding and strengthening our business model, we aim to enhance the quality of our corporate infrastructure by strengthening HR investments and management for the purposes of developing and securing diverse and high-performance personnel while also proactively executing IT investments on an unprecedented scale.
Revenues by Region
The following table sets forth the percentage of our total operating income under IFRS for the fiscal years ended March 31, 2025, 2024 and 2023, based on the total operating income of our offices in the indicated regions. In Japan, we compete with other major Japanese banking groups and financial service providers. Outside Japan, we mainly compete with global financial institutions in the Americas, Europe and Middle East, and Asia and Oceania.
| For the fiscal year ended March 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Region: |
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| Japan |
29 | % | 36 | % | 48 | % | ||||||
| Foreign: |
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| Americas |
34 | % | 29 | % | 21 | % | ||||||
| Europe and Middle East |
9 | % | 10 | % | 9 | % | ||||||
| Asia and Oceania (excluding Japan) |
28 | % | 25 | % | 22 | % | ||||||
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| Total |
100 | % | 100 | % | 100 | % | ||||||
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Seasonality
Our business is not materially affected by seasonality.
Sources and Availability of Raw Materials
We are not reliant on any particular source of raw materials.
Marketing Channels
See “—Description of Operations and Principal Activities” for information on our marketing channels.
Regulations in Japan
Our businesses are subject to extensive regulation, including the effects of changes in the laws, regulations, policies, voluntary codes of practice and interpretations in Japan. On the other hand, deregulation of banking activities in Japan, and more generally of the Japanese financial system, has proceeded, which has made the Japanese banking industry highly competitive.
Supervisory and Regulatory Authorities
Pursuant to the Banking Act, the Financial Services Agency of Japan has the authority in Japan to supervise banks, bank holding companies and banks’ principal shareholders, meaning bank shareholders having 20% (or
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15% in some cases) or more of the voting rights of a bank. The Bank of Japan also has supervisory authority over banks in Japan based primarily on its contractual agreements and transactions with Japanese banks. Only companies licensed by the Prime Minister are defined as banks under the Banking Act, and licenses may be granted only to a kabushiki kaisha, a joint stock corporation, with paid-up capital of ¥2 billion or more.
The Financial Services Agency of Japan
The Prime Minister has supervisory authority over banks in Japan, which is generally delegated to the Financial Services Agency of Japan (“FSA”) except for matters prescribed by cabinet order. The Minister for Financial Services has the power to direct the FSA. Under the Banking Act, the FSA has supervisory control over banks, bank holding companies and banks’ principal shareholders in Japan, except for matters to which the Prime Minister retains authority.
The FSA’s authority includes granting and revoking of operating licenses, and approving business activities such as becoming a principal shareholder, establishment of subsidiaries or overseas offices, mergers, corporate splits or business transfers, and dissolutions or discontinuations of business by existing banks, etc.
The FSA may also instruct a Japanese bank to suspend its business or to remove directors if the bank violates laws, other regulations or their articles of incorporation or commits acts contrary to public policy. The FSA may also direct a Japanese bank in financial difficulty to take certain actions, such as holding certain property in Japan for the protection of depositors. Under the prompt corrective action (“PCA”) system, the FSA may take corrective actions in the case of capital deterioration of financial institutions.
The Ministry of Finance and the FSA have introduced a number of regulatory measures into the banking sector in Japan to secure sound management of banks, as well as measures to increase the transparency of the regulatory process, such as bank holding company regulations, single customer credit limits, disclosure regulations, regulations regarding reserves for loan losses and inspections.
The Banking Act authorizes the FSA to inspect banks and bank holding companies in Japan at any time and with any frequency. The FSA monitors the financial soundness of banks and the status and performance of their control systems and reviews their compliance with laws and regulations. The FSA had issued guidelines on its inspection of financial institutions called the Financial Inspection Manual. The Financial Inspection Manual itself did not have the force of law, but the FSA’s inspections of banks had been based on the Financial Inspection Manual, which emphasized the need for bank self-assessment rather than assessment based on the advice of the government authority and risk management by each bank instead of a mere assessment of its assets. In December 2017, the FSA published a report on its supervisory approaches and transformation, which was revised in June 2018. Based on the report, the FSA introduced its new supervisory approaches, which include expanding the scope of its supervisory approaches from a backward-looking, element-by-element compliance check to substantive, forward-looking and holistic analysis and judgment, leading to the FSA’s repeal of the Financial Inspection Manual in December 2019. Following an inspection, the FSA may exercise its authority over a bank under the Banking Act to suspend or terminate its banking business.
The Ministry of Finance
The Ministry of Finance conducts examinations of banks in relation to foreign exchange transactions under the Foreign Exchange and Foreign Trade Act of Japan (the “FEFTA”).
The Bank of Japan
The Bank of Japan (“BOJ”) is the central bank of Japan and serves as the principal instrument for the execution of Japan’s monetary policy. The BOJ implements monetary policy mainly by adjusting its basic loan rate, open market operations and imposing deposit reserve requirements. All banks in Japan maintain deposits
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with the BOJ and rely substantially upon obtaining borrowings from and rediscounting bills with the BOJ. Moreover, most banks in Japan maintain current accounts under agreements with the BOJ pursuant to which the BOJ can conclude a contract with SMBC concerning on-site examinations. BOJ supervision is intended to support the effective execution of monetary policy, while FSA supervision aims to maintain the sound operations of banks in Japan and promote the security of depositors. Through its examinations, the BOJ seeks to identify problems at an early stage and give corrective guidance where necessary.
Regulations Regarding Capital Adequacy and Liquidity
Capital Adequacy Requirement
In 1988, the BCBS issued the Basel Capital Accord. The Basel Capital Accord sets minimum risk-weighted capital ratios for the purpose of maintaining sound management of banks which have international operations. The minimum risk-weighted capital ratio required was 8% on both a consolidated and nonconsolidated basis. In 2004, the BCBS issued the amended Basel Capital Accord (“Basel II”), which includes detailed measurement of credit risk, the addition of operational risk, a supervisory review process and market discipline through disclosure. These amendments did not change the minimum risk-weighted capital ratio of 8% applicable to banks with international operations (including SMBC). These rules took effect in Japan in 2007, and since 2008, banks have been able to apply the advanced IRB approach for credit risk and the advanced measurement approach for operational risk.
In July 2009, the BCBS approved a final package of measures to enhance certain elements of the Basel II framework, which includes an increase of the risk weights of resecuritization instruments and revisions of certain trading book rules (referred to as “Basel 2.5”), and the FSA’s capital adequacy guidelines which reflect such framework have been applied in Japan from December 2011.
In September 2009, the GHOS reached an agreement on several key measures to strengthen regulation of the banking sector, and in December 2009 the BCBS published a consultative document entitled “Strengthening the resilience of the banking sector” containing proposals on these measures centering on several core areas. The BCBS’ proposals focused on raising the quality, consistency and transparency of the regulatory capital base through measures including a requirement that the predominant form of Tier 1 capital must be common shares and retained earnings; limitations on the use of hybrid instruments with an incentive to redeem; a requirement that regulatory adjustments, including deductions of the amount of net deferred tax assets which rely on the future profitability of a bank, be applied to common equity generally; and a requirement for additional disclosure regarding regulatory capital levels.
The BCBS’ proposals also cover the following key areas:
| • | strengthening the risk coverage of the capital framework; |
| • | introducing a leverage ratio as a supplementary measure to the Basel II risk-based framework with a view to migrating to a Pillar 1 (minimum capital requirement) treatment based on appropriate review and calibration (for further information, see “Leverage Ratio” below); |
| • | introducing measures to promote the build-up of capital buffers in good times that can be drawn upon in periods of stress; and |
| • | introducing minimum liquidity standards for internationally active banks that include a 30-day liquidity coverage ratio requirement underpinned by a longer-term structural liquidity ratio (for further information, see “Liquidity Requirement” below). |
In July 2010, the GHOS reached a broad agreement on the overall design of the BCBS’ capital and liquidity reform package. In addition, in August 2010, the BCBS issued for consultation a proposal to enhance the loss absorbency function of regulatory capital. In September 2010, the GHOS announced a substantial strengthening of existing capital requirements. The framework of the proposed reform was endorsed by the G-20 leaders at their Seoul summit in November 2010.
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These capital reforms were phased in from January 2013 to January 2019. The minimum common equity requirement, the minimum Tier 1 capital requirement and the total minimum capital requirement have been 4.5%, 6% and 8%, respectively, since January 2015. Moreover, banks have been required to hold a capital conservation buffer of 2.5% to withstand future periods of stress since January 2019. As a result, taking the capital conservation buffer into account, the minimum common equity requirement, the minimum Tier 1 capital requirement and the total minimum capital requirement have been 7%, 8.5% and 10.5%, respectively, since January 2019. In addition, a countercyclical buffer within a range of 0% to 2.5% of Common Equity Tier 1 capital has been implemented according to national circumstances. In December 2010, the BCBS published the new Basel III rules text. To reflect changes made by the BCBS, the FSA changed its capital adequacy guidelines. The FSA’s changes have mostly been applied from March 31, 2013, which generally reflect the main measures of the minimum capital requirements of the BCBS that started to be phased in on January 1, 2013 and have been fully applied from March 2019. The FSA’s changes which reflect capital buffer requirements under Basel III and the G-SIB capital surcharge described below have been applied from March 2016.
In addition to the above-mentioned minimum capital requirements and capital buffer requirements under Basel III, organizations identified by the FSB as G-SIBs, which includes us, are required to maintain an additional 1% to 2.5% of Common Equity Tier 1 capital as a percentage of risk-weighted assets based on the organization’s size, interconnectedness, substitutability, complexity and cross-jurisdictional activity as determined by the FSB. The amount of G-SIB capital surcharge that has applied to us from 2019 based on the FSB’s determination is 1% of risk-weighted assets. The FSB updates its list of G-SIBs on an annual basis.
G-SIBs are also subject to a global standard for TLAC, which establishes minimum requirements for loss-absorbing and recapitalization capacity available in resolution at G-SIBs, to ensure that they can be resolved in an orderly manner without putting public funds at risk. In November 2015, as part of its agenda to address risks arising from G-SIBs, the FSB published the FSB’s TLAC Standards. The FSB’s TLAC Standards define certain minimum requirements for instruments and liabilities so that if a G-SIB fails, it will have sufficient loss-absorbing and recapitalization capacity available to ensure that it can be resolved in an orderly manner which minimizes potential impact on financial stability, maintains the continuity of critical functions and avoids exposing public funds to loss.
In March 2019, the FSA published the Japanese TLAC Standards. The Japanese TLAC Standards apply to Covered SIBs, which includes (i) Japanese G-SIBs, which are designated as G-SIBs by the FSA in accordance with the designation by the FSB, such as us, and (ii) any domestic systemically important bank in Japan (Japanese D-SIB) that has been deemed to be in particular need for a cross-border resolution arrangement and as having particular systemic significance to the Japanese financial system if it fails. The Japanese TLAC Standards were applied to Japanese G-SIBs from March 31, 2019.
Under the FSB’s TLAC standards and the Japanese TLAC Standards, entities designated by the FSA as an entity that would enter into domestic resolution proceedings for Japanese G-SIBs, or the Domestic Resolution Entities, are required:
| • | to meet certain minimum external TLAC requirements (being at least 16% of their risk-weighted assets from March 2019 and at least 18% of their risk-weighted assets from March 2022 as well as at least 6% of their Basel III leverage ratio denominator from March 31, 2019, at least 6.75% from March 31, 2022 and at least 7.10% from April 1, 2024, while excluding amounts of deposits to the BOJ from the total exposure for the purpose of calculation of the applicable Basel III leverage ratio denominator, taking into account exceptional macroeconomic conditions and other circumstances); and |
| • | to cause any material subsidiaries or material sub-groups in Japan designated as systemically important by the FSA, or any foreign subsidiaries that are subject to TLAC or similar requirements by the relevant foreign authorities, to maintain a certain level of capital and debt that is recognized as having loss-absorbing and recapitalization capacity (“internal TLAC”). |
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In addition, according to the Japanese TLAC Standards, Japanese G-SIBs are allowed to count Japan’s deposit insurance fund reserves in an amount equivalent to 2.5% of their risk-weighted assets from March 2019 and 3.5% of their risk-weighted assets from March 2022 as external TLAC.
The Japanese TLAC Standards also prescribe a minimum TLAC requirement of at least 6% of the resolution group’s Basel III leverage ratio denominator from March 31, 2019, increasing to at least 6.75% from March 31, 2022, in accordance with the FSB’s TLAC Standards, for bank holding companies of Japanese G-SIBs including us. The minimum TLAC requirement under the Japanese TLAC Standards increased to 7.10% of the resolution group’s Basel III leverage ratio denominator from April 1, 2024, while excluding amounts of deposits to the BOJ from the total exposure for the purpose of calculation of the applicable Basel III leverage ratio denominator, taking into account exceptional macroeconomic conditions and other circumstances.
In our case, the FSA designated SMFG as our Domestic Resolution Entity, which makes SMFG subject to the external TLAC requirements. The FSA also designated SMBC and SMBC Nikko Securities as our material subsidiaries in Japan, for which we are required to maintain a certain level of internal TLAC.
In the FSA’s explanatory paper entitled “The FSA’s Approach to Introduce the TLAC Framework,” which was published in April 2016 and revised in April 2018, the FSA has identified Single Point of Entry (“SPE”) resolution, in which resolution powers are applied to the ultimate holding company of a banking group by a single national resolution authority, as the preferred strategy for resolving currently designated G-SIBs in Japan. Under a possible model for SPE resolution of Japanese G-SIBs described in the Japanese TLAC Standards, if, with respect to a material subsidiary of a Japanese G-SIB that is designated as systemically important by the FSA, the FSA issues to the Domestic Resolution Entity of the Japanese G-SIB an order concerning the restoration of financial soundness, including recapitalization of, and restoration of liquidity to, such material subsidiary, such material subsidiary’s internal TLAC instruments will be written off or, if applicable, converted into equity in accordance with the applicable contractual loss-absorption provisions of such internal TLAC instruments. The FSA may issue such an order pursuant to Article 52-33, Paragraph 1 of the Banking Act upon its determination that the material subsidiary is non-viable due to a material deterioration in its financial condition after recognizing that its liabilities exceed or are likely to exceed its assets, or that it has suspended or is likely to suspend payment of its obligations.
Furthermore, as a disincentive for G-SIBs facing the maximum G-SIB capital surcharge to “increase materially their global systemic importance in the future,” an additional 1% capital surcharge could be applied. So long as we are identified as a G-SIB, we are also subject to stronger supervisory mandates and higher supervisory expectations for risk management functions, data aggregation capabilities, risk governance and internal controls. The substance of this heightened supervision has not yet been fixed, but we anticipate that at a minimum any rules will contain more stringent reporting requirements and impose common frameworks for data aggregation and internal risk management processes on G-SIBs.
Because we have been identified as a G-SIB, we are also subject to, among other things, resolution-related requirements described in the FSB’s “Key Attributes of Effective Resolution Regimes for Financial Institutions.” In particular, the FSB has required the initial group of G-SIBs to have in place a recovery and resolution plan, including a group-level plan, containing various specified elements, to be subject to regular resolvability assessments. Under the Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc., issued by the FSA, as part of crisis management, financial institutions identified as G-SIBs must prepare and submit a recovery plan, which includes a description of events that would trigger implementation of the recovery plan and the analysis of the recovery options to the FSA, and the FSA must prepare the resolution plan for each G-SIB.
In December 2017, the GHOS endorsed the outstanding Basel III regulatory reforms. The endorsed reforms include the following elements:
| • | a revised standardized approach for credit risk; |
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| • | revisions to the internal ratings-based approach for credit risk, where the use of the most advanced internally modeled approaches for low-default portfolios will be limited; |
| • | revisions to the credit valuation adjustment framework, including the removal of the internally modeled approach and the introduction of a revised standardized approach; |
| • | a revised standardized approach for operational risk, which will replace the existing standardized approaches and the advanced measurement approach; |
| • | revisions to the measurement of the leverage ratio and a leverage ratio buffer for G-SIBs; and |
| • | revisions to the capital floor, under which banks’ risk-weighted assets must be no lower than 72.5% of total risk-weighted assets as calculated using only the standardized approaches under the revised Basel III framework, and a requirement that banks disclose their risk-weighted assets based on such standardized approaches. |
In March 2020, the GHOS endorsed a set of measures to provide additional operational capacity for banks and supervisors to respond to the immediate financial stability priorities resulting from the impact of the COVID-19 pandemic on the global banking system. According to the measures, the implementation timeline of the outstanding Basel III standards has been deferred by one year. The revised framework, other than revisions to the capital floor, were scheduled to take effect from January 1, 2023. The revisions to the capital floor were scheduled to be phased in from January 1, 2023, with an initial capital floor of 50%, and were scheduled to reach 72.5% by January 1, 2028. In March 2020, in light of the above changes, the FSA announced its plan to defer the implementation of Basel III standards in Japan by one year, to March 31, 2023. In September 2021, the FSA announced its plan to allow domestic banks which do not use internal models to calculate the amount of credit risk to delay the application of the Basel III standards in Japan for another year, to March 31, 2024. Furthermore, in March 2022, the FSA announced that it would defer the implementation of Basel III standards in Japan based on international developments and dialogue with stakeholders, (i) for domestic banks which use internal models to calculate the amount of credit risk and internationally active banks, including us, to March 31, 2024 and (ii) for domestic banks which do not use internal models to calculate the amount of credit risk to March 31, 2025 (in both cases, excluding banks that have notified the FSA that they wish to apply Basel III standards earlier). In April 2022 and November 2022, the FSA published amendments to the regulatory notices regarding credit risk, credit valuation adjustment risk, market risk and operational risk for implementation of the Basel III standards in Japan.
Our securities subsidiaries in Japan are also subject to capital adequacy requirements under the FIEA. Under the requirements, securities firms must maintain a minimum capital adequacy ratio of 120% on a nonconsolidated basis and must file periodic reports with the Commissioner of the FSA or the Director-General of the appropriate Local Finance Bureau, and also publicly disclose their capital adequacy ratio on a quarterly basis. In addition, securities firms whose total assets exceed ¥1,000 billion are required to maintain this minimum capital adequacy ratio on a consolidated basis. This requirement on a consolidated basis is applied in addition to and in a manner similar to the requirements on a nonconsolidated basis referred to above. Failure to meet the capital adequacy requirements will trigger mandatory regulatory action. For example, in the case of the requirement on a nonconsolidated basis, a securities firm with a capital adequacy ratio of greater than 120%, but less than 140% will be required to file daily reports with the Commissioner of the FSA or the Director-General of the appropriate Local Finance Bureau. A securities firm with a capital adequacy ratio of less than 120% may be ordered to change its business conduct, place its property in trust or be subject to other supervisory orders, as the relevant authorities deem appropriate. A securities firm with a capital adequacy ratio of less than 100% may be subject to temporary suspension of all or part of its business operations or cancellation of its license to act as a securities broker and dealer.
The capital adequacy ratio for securities firms is defined as the ratio of adjusted capital to a quantified total of business risks, which include market risks, counterparty risks and operational risks (e.g., risks in carrying out daily business activities, such as administrative problems with securities transactions and clerical mistakes)
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quantified in the manner specified by a rule promulgated under the FIEA. Adjusted capital is defined as net worth less illiquid assets, as determined in accordance with Japanese GAAP. Net worth consists mainly of stated capital, additional paid-in capital, retained earnings, reserves for securities transactions, certain allowances for doubtful current accounts, net unrealized gains (losses) in the market value of investment securities, and subordinated debt. Illiquid assets generally include non-current market assets, certain deposits and advances, and prepaid expenses.
Leverage Ratio
In March 2015, the FSA published its leverage ratio guidelines which have been applied from March 31, 2015 to help ensure broad and adequate capture of both on- and off-balance sheet sources of leverage for internationally active banks. The FSA’s leverage ratio guidelines are based on the text of the leverage ratio framework and disclosure requirements issued by the BCBS in January 2014.
In December 2017, the definition and requirements of the leverage ratio were revised as part of the revised Basel III reforms. Under the revised Basel III reforms, in addition to meeting the minimum leverage ratio, G-SIBs are required to meet a leverage ratio buffer, which takes the form of a Tier 1 capital buffer set at 50% of the applicable G-SIB capital surcharge. Various refinements were also made to the definition of the leverage ratio exposure measure. The leverage ratio requirements under the definition based on the framework issued by the BCBS in January 2014 were implemented as a Pillar 1 measurement from January 2018, and those under the revised definition and the leverage ratio buffer requirement for G-SIBs were implemented as a Pillar 1 measurement from January 1, 2023.
In March 2019, the FSA published its guidelines for the leverage ratio applicable to banks and bank holding companies with international operations, which have been applied from March 2019. Under the FSA’s guidelines for the leverage ratio, banks and bank holding companies with international operations must maintain a leverage ratio of at least 3% on both a consolidated basis and a nonconsolidated basis for banks and on a consolidated basis for bank holding companies.
In June 2020, the FSA published and implemented amendments to its guidelines for the leverage ratio, which mainly exclude deposits with the BOJ from the denominator for the calculation of the leverage ratio in order to maintain harmonization with the monetary policy implemented by the BOJ and the prudential regulations for banks and other financial institutions. In July 2022, the FSA published amendments to its guidelines for the leverage ratio. Under the amended guidelines, the leverage ratio buffer requirement for G-SIBs in Japan took effect from March 31, 2023, while the finalized definition of the leverage ratio exposure measure took effect from March 31, 2024, except for banks that had notified the FSA that they wished to apply amended requirements earlier. Furthermore, in November 2022, the FSA published amendments to its guidelines for the leverage ratio, which provided that, effective from April 1, 2024, the minimum leverage ratio is increased from 3% to 3.15%, the minimum leverage-based Total Loss-Absorbing Capacity ratio is increased from 6.75% to 7.10% and the leverage buffer applicable to G-SIBs is increased by 0.05%, while continuing to exclude amounts of deposits with the BOJ from the total exposure, taking into account exceptional macroeconomic conditions and other circumstances.
Liquidity Requirement
In October 2014, the FSA published its guidelines for the liquidity coverage ratio (“LCR”) applicable to banks and bank holding companies with international operations that have been applied from March 31, 2015. These guidelines are based on the full text of the LCR standard issued by the BCBS in January 2013. The LCR is intended to promote resilience to potential liquidity disruptions over a thirty-day horizon and help ensure that global banks have sufficient, unencumbered, high-quality liquid assets to offset the net cash outflows they could encounter under an acute short-term stress scenario. Under the FSA’s LCR guidelines, banks and bank holding companies with international operations must maintain an LCR of at least 100% on both a consolidated basis and a nonconsolidated basis. The minimum LCR requirements have been 100% since March 31, 2019.
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In March 2021, the FSA published its guidelines for net stable funding ratio (“NSFR”) applicable to banks and bank holding companies with international operations that have been applied from September 30, 2021. These guidelines are based on the full text of the NSFR standard issued by the BCBS in October 2014. The NSFR is intended to require a minimum amount of stable sources of funding at a bank relative to the liquidity profiles of the bank’s assets, as well as the potential for contingent liquidity needs arising from off-balance sheet commitments, over a one-year horizon. Under the FSA’s NSFR guidelines, banks and bank holding companies with international operations must maintain an NSFR of at least 100% on both a consolidated basis and a nonconsolidated basis. The minimum NSFR requirements have been 100% from September 30, 2021.
Self-Assessment, Reserves and Related Disclosure
Financial institutions, including SMBC, are required to establish self-assessment programs to, among other things, analyze their assets giving due consideration to accounting principles and other applicable rules and to classify their assets into categories taking into account the likelihood of repayment and the risk of impairment to the value of the assets. These classifications determine whether an addition to or reduction in reserves or write-offs is necessary.
Pursuant to the Japanese Institute of Certified Public Accountants (“JICPA”) guidelines, the outcome of each financial institution’s self-assessment leads to substantially all of a bank’s loans and other claims on customers being analyzed by classifying obligors into five categories: (1) normal borrowers; (2) borrowers requiring caution; (3) potentially bankrupt borrowers; (4) virtually bankrupt borrowers; and (5) bankrupt borrowers. The reserve for possible loan losses is then calculated based on the obligor categories.
FSA guidelines require banks to classify their assets not only by the five categories of obligor but also by four categories of quality. SMBC has adopted its own internal guidelines for self-assessment which conform to guidelines currently in effect and comply with the PCA system requirements.
Based on the results of the self-assessment discussed above, SMBC is required to establish a reserve for its loan portfolio in an amount SMBC considers adequate at a balance sheet date. Three categories of reserves SMBC establishes, for statutory purposes, along with the Accounting Standards for Banks issued by the Japanese Bankers Association, are a general reserve, a specific reserve and a reserve for specific overseas loan losses.
The Banking Act and the Financial Reconstruction Act require banks to disclose their loans and their other problem assets. Under these laws, assets are classified into four categories: (1) bankrupt and quasi-bankrupt assets, (2) doubtful assets, (3) substandard assets and (4) normal assets. Doubtful assets generally correspond to the higher tier portion of the non-accrual loans (the borrowers of which are not, but have the potential to become, bankrupt). The substandard assets generally correspond to the total of the restructured loans and past due loans (three months or more). Bankrupt and quasi-bankrupt assets and doubtful assets also include non-loan assets.
Prompt Corrective Action System
Under the Prompt Corrective Action (“PCA”) system, the FSA may take corrective actions depending upon the extent of capital deterioration of a financial institution. The FSA may require a bank with international operations to submit and implement a capital reform plan, if;
| • | the Common Equity Tier 1 risk-weighted capital ratio becomes less than 4.5% but not less than 2.25%; |
| • | the Tier 1 risk-weighted capital ratio becomes less than 6% but not less than 3%; |
| • | the total risk-weighted capital ratio of a bank becomes less than 8% but not less than 4%; or |
| • | the leverage ratio becomes less than 3.15% but not less than 1.575%. |
The FSA may order a bank with international operations to (1) submit and implement a plan for improving its capital; (2) prohibit or restrict the payment of dividends to shareholders or bonuses to officers; (3) reduce
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assets or restrict any increase in assets; (4) prohibit or restrict the acceptance of deposits under terms less advantageous than ordinary terms; (5) reduce the business of some offices; (6) eliminate some offices other than the head office; (7) reduce or prevent the launching of non-banking businesses; or (8) take certain other actions, if;
| • | the Common Equity Tier 1 risk-weighted capital ratio becomes less than 2.25% but not less than 1.13%; |
| • | the Tier 1 risk-weighted capital ratio becomes less than 3% but not less than 1.5%; |
| • | the total risk-weighted capital ratio of a bank declines to less than 4% but not less than 2%; or |
| • | the leverage ratio becomes less than 1.575% but not less than 0.7875% (in this case, the FSA may order a bank to take actions described in (1) and (3) to (8) of the paragraph above). |
The FSA may order a bank with international operations to conduct any one of the following: (1) a capital increase; (2) a substantial reduction in its business; (3) a merger; or (4) abolishment of its banking business, if;
| • | the Common Equity Tier 1 risk-weighted capital ratio becomes less than 1.13% but not less than 0%; |
| • | the Tier 1 risk-weighted capital ratio becomes less than 1.5% but not less than 0%; |
| • | the total risk-weighted capital ratio of a bank declines to less than 2% but not less than 0%; or |
| • | the leverage ratio becomes less than 0.7875% but not less than 0%. |
The FSA may order the bank with international operations to suspend all or part of its business, if
| • | the Common Equity Tier 1 risk-weighted capital ratio, Tier 1 risk-weighted capital ratio or the total risk-weighted capital ratio declines below 0%; or |
| • | the leverage ratio declines below 0%. |
The FSA may take actions similar to those described above to a bank holding company that holds a bank with international operations, if;
| • | the Common Equity Tier 1 risk-weighted capital ratio of the bank holding company declines to levels below 4.5%, 2.25%, 1.3% or 0%; |
| • | the Tier 1 risk-weighted capital ratio of the bank holding company declines to levels below 6%, 3%, 1.5% or 0%; |
| • | the total risk-weighted capital ratio of the bank holding company declines to levels below 8%, 4%, 2% or 0%; or |
| • | the leverage ratio of the bank holding company declines to levels below 3.15%, 1.575%, 0.7875% or 0%. |
Prompt Warning System
The prompt warning system currently in effect allows the FSA to take precautionary measures to maintain and promote the sound operation of financial institutions before those financial institutions become subject to the PCA system. These measures include requiring a financial institution to reform: (1) profitability, if deemed necessary to improve profitability based upon a fundamental profit index; (2) credit risk management, if deemed necessary to reform management of credit risk based upon the degree of large credit concentration and other circumstances; (3) stability, if deemed necessary to reform management of market and other risks based upon, in particular, the effect of securities price fluctuations; and (4) cash flow management, if deemed necessary to reform management of liquidity risks based upon deposit trends and level of reserve for liquidity.
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Restrictions on Capital Distributions
Under the FSA’s capital adequacy guidelines and guidelines for the leverage ratio and related ordinances, if a bank fails to maintain capital levels under the capital buffer requirements or the leverage buffer requirements, the FSA may order a bank to submit and implement a reasonable capital distribution constraint plan to restore the capital levels. This plan could include restrictions on capital distributions, such as dividends, share buybacks, discretionary payments on Additional Tier 1 capital instruments and bonuses, in such amount as determined depending on the degree of insufficiency of such requirements.
Regulations for Stabilizing the Financial System
Deposit Insurance System
The Deposit Insurance Act was enacted to protect depositors when deposit-taking institutions fail to meet their obligations. The Deposit Insurance Corporation of Japan (“DIC”) implements the law and is supervised by the Prime Minister and the Minister of Finance. Subject to limited exceptions, the Prime Minister’s authority is delegated to the FSA Commissioner.
From April 2022 to March 2025, the DIC received annual insurance premiums from member deposit-taking institutions amounting to 0.021% of deposits primarily for payment and settlement purposes and 0.014% of deposits for other deposits, and from April 2025, they amounted to 0.022% and 0.014%, respectively.
Premiums held by the DIC may be either deposited at deposit-taking institutions or used to purchase marketable securities. The insurance money may be paid out to depositors in case of a suspension of repayments of deposits, banking license revocation, dissolution or bankruptcy of a bank. Payouts are generally limited to a maximum of ¥10 million of principal amount together with any interest accrued with respect to each depositor. Only non-interest-bearing deposits that are redeemable upon demand and used by depositors primarily for payment and settlement functions are protected in full.
City banks (including SMBC), regional banks (including member banks of the second association of regional banks), trust banks, credit associations, credit cooperatives, labor banks and JAPAN POST BANK Co., Ltd. (“Japan Post Bank”) participate in the deposit insurance system on a compulsory basis.
The Deposit Insurance Act also provides a permanent system for resolving failed deposit-taking institutions.
The basic method for resolving a failed deposit-taking institution under the Deposit Insurance Act is cessation of the business by paying insurance money to depositors up to the principal amount of ¥10 million plus accrued interest per depositor, or pay-off or transfer of the business to another deposit-taking institution, with financial assistance provided within the cost of pay-off. Under the Deposit Insurance Act, transfer of business is regarded as the primary method. In order to affect a prompt transfer of business, the following framework has been established:
| • | a Financial Reorganization Administrator is appointed by the FSA Commissioner and takes control of the management and assets of the failed deposit-taking institution. The administrator is expected to diligently search for a deposit-taking institution which will succeed to the business of the failed institution; |
| • | if no successor deposit-taking institution can be immediately found, a “bridge bank” will be established by the DIC for the purpose of temporarily maintaining the operations of the failed deposit-taking institution, and the bridge bank will seek to transfer the failed deposit-taking institution’s assets to another deposit-taking institution or dissolve the failed deposit-taking institution; and |
| • | in order to facilitate or encourage a deposit-taking institution to succeed to a failed business, financial aid may be provided by the DIC to any successor deposit-taking institution to enhance its capital after succession or to indemnify it for losses incurred as a result of the succession. |
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Where it is anticipated that the failure of a deposit-taking institution may cause an extremely grave problem in maintaining the financial order in Japan or the region where the deposit-taking institution is operating, the following exceptional measures may be taken following deliberation by Japan’s Financial Crisis Response Council:
| • | the DIC may subscribe for shares or other instruments issued by the relevant deposit-taking institution or the holding company thereof and require the institution to submit to the DIC a plan to reestablish sound management (Item 1 measures) (dai ichigo sochi); |
| • | once the deposit-taking institution fails, financial aid exceeding the cost of pay-off may be available to the institution (Item 2 measures) (dai nigo sochi); and |
| • | if the failed institution is a bank and the problem cannot be avoided by other measures, then the DIC may acquire all of the shares of the bank (Item 3 measures) (dai sango sochi). |
In order to fund the above-mentioned activities, the DIC may borrow from financial institutions or issue bonds which may be guaranteed by the Government of Japan.
In addition, on June 12, 2013, a bill to amend the Deposit Insurance Act which includes establishment of a new orderly resolution regime of financial institutions was enacted and became effective on March 6, 2014. Financial institutions including banks, securities companies and insurance companies and their holding companies will be subject to the new resolution regime that includes, among others, the following features.
Under the new resolution regime, where the Prime Minister recognizes that the failure of a financial institution which falls into either of (a) or (b) below may cause significant disruption in the financial markets or other financial systems in Japan if measures described in (a) (specified Item 1 measures) (tokutei dai ichigo sochi) or measures described in (b) (specified Item 2 measures) (tokutei dai nigo sochi) are not taken, the Prime Minister may confirm that any of the following measures need to be applied to the financial institution following deliberation by Japan’s Financial Crisis Response Council:
(a) if the financial institution is not a financial institution whose liabilities exceed its assets, which means it is unable to fully perform its obligations with its assets, the DIC shall supervise the operation of business and management and disposal of assets of that financial institution, and may provide it with loans or guarantees necessary to avoid the risk of significant disruption in the financial systems in Japan, or subscribe for shares or subordinated bonds of, or lend subordinated loans to, the financial institution, taking into consideration the financial condition of the financial institution;
(b) if the financial institution is a financial institution whose liabilities exceed or are likely to exceed its assets or which has suspended or is likely to suspend payment of its obligations, the DIC shall supervise the operation of business and management and disposal of assets of that financial institution and may provide financial aid necessary to assist a merger, business transfer, corporate split or other reorganization in respect to such failed financial institution; and
if a measure set out in (b) above is determined to be taken with respect to a financial institution, the Prime Minister may order that the financial institution’s operations of business and management and disposal of assets be placed under the special control of the DIC. The business or liabilities of the financial institution subject to the special supervision by the DIC as set forth above may also be transferred to a “bridge bank” established by the DIC for the purpose of the temporary maintenance and continuation of operations of, or repayment of the liabilities of, such financial institution, and the bridge bank will seek to transfer the financial institution’s business or liabilities to another financial institution or dissolve the financial institution. The financial aid provided by the DIC to assist a merger, business transfer, corporate split or other reorganization in respect to the financial institution set out in (b) above may take the form of a monetary grant, loan or deposit of funds, purchase of assets, guarantee or assumption of debts, subscription of preferred stock or subordinated bonds, subordinated loan, or loss sharing.
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The expenses for implementation of the measures for these crisis management operations will be borne by the financial industry; provided, however, the Government of Japan may provide subsidies to the DIC within the limit to be specified in the government budget in cases where it is likely to cause extremely serious hindrance to the maintenance of the credit system in Japan or significant turmoil in the financial market or other financial system of Japan if such expenses are to be borne only by the financial industry.
In March 2014, the FSA made an announcement clarifying the requirement of loss absorbency at the point of non-viability for additional Tier 1 instruments and Tier 2 instruments under Basel III issued by banks and bank holding companies. According to the announcement, (i) additional Tier 1 instruments and Tier 2 instruments under Basel III issued by a bank must be written-down or converted into common shares when the Prime Minister of Japan confirms (nintei) that the above-described “Item 2 measures (dai nigo sochi),” “Item 3 measures (dai sango sochi),” or “specified Item 2 measures (tokutei dai nigo sochi)” need to be applied to the bank and (ii) additional Tier 1 instruments and Tier 2 instruments under Basel III issued by a bank holding company must be written-down or converted into common shares when the Prime Minister of Japan confirms (nintei) that the above-described “specified Item 2 measures (tokutei dai nigo sochi)” need to be applied to the bank holding company. The FSA also stated in the announcement that the trigger event for loss absorbency at the point of non-viability with respect to such instruments should be construed in accordance with the then effective financial crisis response framework for banks and bank holding companies that have failed or are likely to fail, since the purpose of such write-down or conversion required under Basel III is to ensure that all classes of these capital instruments fully absorb losses at the point of non-viability before taxpayers are exposed to loss.
Special Measures Act Concerning Facilitation of Reorganization by Financial Institutions, Etc.
Under the Special Measures Act Concerning Facilitation of Reorganization by Financial Institutions, Etc.: (1) for one year after the merger or transfer of the entire business of a deposit-taking institution, the maximum amount to be covered by the deposit insurance will be ¥10 million multiplied by the number of parties to the merger or business transfer; and (2) the procedures are simplified to a certain extent in connection with the transfer of an entire business or a merger with another deposit-taking institution by a deposit-taking institution that is made in accordance with a management base-strengthening plan that has been approved by the Government of Japan.
Single Customer Credit Limit
The Banking Act restricts the aggregate amount of credit and loans that may be extended to any single customer in order to avoid the excessive concentration of credit risks and promote the fair and extensive use of bank credit. The credit limit of bank holding companies, banks or bank groups for any single customer, is 25% of the Tier 1 capital of the bank holding company, bank or bank group, with certain adjustments.
Restrictions on Activities of a Bank Holding Company
Under the Banking Act, a bank holding company is required to enhance group management by measures including: establishment of a basic policy for such group, coordination of conflicts of interest among group companies, development of a group compliance system and others. A bank holding company, with prior approval of the Government of Japan, is permitted to perform certain functions (such as “back office” or “middle office” functions) on behalf of its group companies, as specified by regulation.
In general, a bank holding company is prohibited from carrying on any business other than the management of its subsidiaries and other incidental businesses. A bank holding company may have any of the following as a subsidiary: a bank, a securities company, an insurance company or a foreign subsidiary that engages in the banking, securities or insurance business. In addition, a bank holding company may have as a subsidiary any company that engages in finance-related business, such as a credit card company, a leasing company or an investment advisory company. Certain companies that are designated by ministerial ordinance as those that
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cultivate new business fields may also become a subsidiary of a bank holding company. Furthermore, a bank or a bank holding company, with prior approval of the government, is permitted to hold voting rights of companies conducting businesses that contribute to or are expected to contribute to the sophistication of the banking business or the enhancement of customer convenience by utilizing information technology or other technologies, regardless of the shareholding restriction.
Restriction on Aggregate Shareholdings by a Bank
The Act Concerning Restriction on Shareholdings by Banks requires Japanese banks and their qualified subsidiaries to limit the aggregate market value (excluding unrealized gains, if any) of their equity securities holdings to an amount equal to 100% of their consolidated Tier 1 capital, with adjustments, in order to reduce exposure to stock price fluctuations. Treasury shares, shares issued by subsidiaries, shares not listed on any stock exchange or not registered with any over-the-counter (“OTC”) market, shares held as trust assets, and shares acquired through debt-for-equity swaps in restructuring transactions are excluded from this limitation. In order to facilitate the disposition of shares of listed stocks held by banks while preventing adverse effects caused by sales of large amounts of shares in a short period of time, share purchases by the Banks’ Shareholdings Purchase Corporation of listed shares have been restarted from March 2009.
Shareholding Restrictions Applicable to a Bank Holding Company and a Bank
The provision of the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade which prohibits banks from holding more than 5% of the voting rights of non-financial companies in Japan does not apply to bank holding companies. However, the Banking Act generally prohibits a bank holding company and its subsidiaries, on an aggregated basis, from holding more than 15% of the voting rights of certain types of companies which are not permitted to become subsidiaries of bank holding companies. Also, the Banking Act generally prohibits a bank and its subsidiaries, on an aggregated basis, from holding more than 5% of the voting rights of certain types of companies which are not permitted to become subsidiaries of banks.
Examination and Reporting Applicable to Shareholders of a Bank
The FSA may request the submission of reports or other materials from a bank and/or its bank holding company or inspect the bank and/or the bank holding company, if necessary, in order to secure the sound and appropriate operation of the business of a bank.
Under the Banking Act, a person who desires to hold 20% (in some exceptional cases, 15%) or more of the voting rights of a bank is required to obtain advance approval of the FSA Commissioner. In addition, the FSA may request the submission of reports or materials from, or may conduct an inspection of, any principal shareholder who holds 20% (in some exceptional cases, 15%) or more of the voting rights of a bank if the FSA deems the action necessary in order to secure the sound and appropriate operation of the business of the bank. Under limited circumstances, the FSA may order the principal shareholder to take such measures as the FSA deems necessary.
Furthermore, any person who becomes a holder of more than 5% of the voting rights of a bank holding company or a bank must report the ownership of the voting rights to the Director General of the relevant local finance bureau within five business days. This requirement is separate from the significant shareholdings report required under the FIEA. In addition, a similar report must be made in respect of any subsequent change of 1% or more in any previously reported holding or in respect of any change in material matters set out in reports previously filed, with some exceptions.
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Regulations for Protection of Customers
Protection of Personal Information
The Act on the Protection of Personal Information and related rules, regulations and guidelines impose requirements on businesses that use databases containing personal information, including appropriate custody of personal information and restrictions on information sharing with third parties.
Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto
The Act on Provision of Financial Services and the Development of the Accessible Environment Thereto, which was renamed from the Act on the Provision of Financial Services in February 2024, protects consumers from incurring unexpected losses from the purchase of financial products. Under the Act, sellers of financial products have a duty to their potential customers to explain important matters (i.e., the nature and magnitude of risk involved) regarding the financial products that they sell. If a seller fails to comply with the duty, the loss in value of the purchased investment product due to the failure to explain is refutably presumed to be the amount of the customer’s loss.
In addition, the Act established a registration scheme for “financial services intermediary businesses.” Through a single registration as a financial services intermediary business, registrants are able to provide intermediary services for each of banking, securities and insurance. The Act does not require any provider of financial services intermediary business to belong to a specific financial institution, but imposes certain regulations to protect customers, including limitations on the type of services that they may provide and prohibitions on the acceptance of assets of customers and lodging a security deposit.
In November 2023, the Act was amended. A part of the amendment took effect from February 2024 and the Act was renamed as “Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto.”
Act Concerning Protection of Depositors and Relief for Victims of Certain Types of Fraud
The Act Concerning Protection of Depositors from Illegal Withdrawals Made by Forged or Stolen Cards requires financial institutions to establish internal systems to prevent illegal withdrawals of deposits made using forged or stolen bank cards. The law also requires financial institutions to compensate depositors for any amount illegally withdrawn using forged or stolen bankcards, subject to certain conditions.
The Act Concerning Payment of Dividends for Relief of Damages from Funds in Account used in connection with Crimes requires that financial institutions take appropriate measures against various crimes including the closing of accounts used in connection with fraud and other crimes. The law also requires financial institutions to make, in accordance with specified procedures, payments from funds collected from the closed accounts to victims of certain crimes.
Laws Prohibiting Money Laundering and Terrorist Financing
Act on Prevention of Transfer of Criminal Proceeds
Under the Act on Prevention of Transfer of Criminal Proceeds, which addresses money laundering and terrorism concerns, financial institutions and certain other entities, such as credit card companies, are required to perform customer identification, submit suspicious transaction reports and keep records of their transactions.
Foreign Exchange and Foreign Trade Act of Japan
Under the FEFTA, financial institutions and certain other entities are required to confirm that necessary permission from the relevant authorities is obtained by the customer or obtain necessary permission itself, for certain transaction involving targets who are designated under the law and the relevant orders thereunder including North Korea or Iran.
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Act on Special Measures Concerning International Terrorist Assets-Freezing, etc. Conducted by the Government Taking into Consideration United Nations Security Council Resolution 1267, etc.
Under the Act on Special Measures Concerning International Terrorist Assets-Freezing, etc. Conducted by the Government Taking into Consideration United Nations Security Council Resolution 1267, etc., conducting certain transactions including donating or lending of money, securities or real estates or refunding of deposit with International Terrorists, who are designated under the law, is generally prohibited.
Other Regulations Related to Our Business
Financial Instruments and Exchange Act of Japan
The FIEA regulates the securities industry and most aspects of securities transactions in Japan, including public offerings, private placements and secondary trading of securities, ongoing disclosure by securities issuers, tender offers for securities, organization and operation of securities exchanges and self-regulatory organizations and registration of securities companies. The Prime Minister has the authority to regulate the securities industry and securities companies, which authority is delegated to the FSA Commissioner under the FIEA. The Securities and Exchange Surveillance Commission, an external agency of the FSA, is independent from the Agency’s other bureaus and is vested with authority to conduct day-to-day monitoring of the securities markets and to investigate irregular activities that hinder fair trading of securities, including inspection of securities companies as well as banks in connection with their securities business. Furthermore, the FSA Commissioner delegates certain authority to the Director General of the Local Finance Bureau to inspect local securities companies and their branches. A violation of applicable laws and regulations may result in various administrative sanctions, including revocation of registration or authorization, suspension of business or an order to discharge any Director or Executive Officer who has failed to comply with applicable laws and regulations. Securities companies are also subject to the rules and regulations of the Japanese stock exchanges and the Japan Securities Dealers Association, a self-regulatory organization of securities companies.
Regulation of the Consumer Finance Business
In order to resolve the problems of heavily indebted borrowers and to effect proper regulation of the consumer finance business, in June 2010, maximum legal interest rates were reduced to levels prescribed by the Interest Rate Restriction Act, ranging from 15% to 20%, and gray zone interest, which is interest on loans in excess of rates prescribed by the Interest Rate Restriction Act up to the 29.2% maximum rate permitted under the Contributions Act, was abolished. Judicial decisions have strictly interpreted the conditions under which consumer finance companies may retain gray zone interest. As a result, claims for refunds of gray zone interest increased substantially. Amendments to the Money Lending Business Act provide an additional upper limit on aggregate borrowings by an individual from all moneylenders over which moneylenders may not extend further loans, as well as stricter regulation and supervision of moneylender activities.
Installment Sales Act
In order to ensure the fairness of transactions with respect to installment and other sales, prevent damage to consumers and manage credit card numbers, the Installment Sales Act imposes requirements on those who conduct installment sales businesses. Especially for credit card companies, these requirements include: (1) coverage of installment sales under the regulations; (2) measures to prevent inappropriate extensions of credit for certain credit transactions; (3) measures to prevent excessive lending for certain credit transactions that include requirements to investigate the payment ability of consumers by use of designated credit information organizations and prohibition of execution of credit agreements that exceed the payment ability of consumers; and (4) measures to protect certain information, such as credit numbers.
Base Erosion and Profit Shifting (BEPS)
In July 2013, the Organization for Economic Co-operation and Development (“OECD”) published the Action Plan on Base Erosion and Profit Shifting (“BEPS”) in order to prevent exploiting of gaps and mismatches
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in tax rules and artificial shifting of profits to low or no-tax locations. In October 2015, the OECD published the final package of measures for a comprehensive, coherent and coordinated reform of the international tax rules for 15 key areas. These measures would apply once they are implemented either in domestic laws or in the network of bilateral tax treaties. Some of the deliverables published by the OECD have been partially reflected in Japanese tax regulations by the tax reforms adopted from 2015 to 2024 and in certain several bilateral tax treaties to which Japan is a party through the implementation of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting in Japan.
In October 2021, 136 countries agreed to the OECD/G20 Inclusive Framework on BEPS (“IF”), which stipulates a two-pillar solution. Pillar 2 is to ensure minimum level of taxation of at least 15% (global minimum taxation). In accordance with IF, the Income Inclusion Rule (“IIR”) of Pillar 2 was introduced as part of Japan’s 2023 and 2024 tax reforms and it became effective for the fiscal year commencing on or after April 1, 2024. The IIR stipulates that a constituent entity (“CE”) of a multinational enterprise group (“MNE Group”) that meets the consolidated revenue threshold is subject to an additional tax if the effective tax rate in the low-tax jurisdiction for any CE of the MNE Group is below the minimum tax rate of 15%. The Qualified Domestic Minimum Top-up Tax (“QDMTT”) of Pillar 2 was also introduced as part of Japan’s 2025 tax reform and it will become effective for the fiscal year commencing on or after April 1, 2026. The QDMTT operates to increase domestic tax liability to the minimum tax rate of 15% on certain qualifying profits earned by CEs that are either Japanese corporations or non-Japanese corporations having a permanent establishment within Japan.
Common Reporting Standard (CRS)
In order to prevent tax evasion and avoidance through offshore financial accounts, the OECD developed the Common Reporting Standard (“CRS”), which calls on jurisdictions to obtain information on financial accounts of non-residents from their financial institutions and automatically exchange that information with other jurisdictions. From the perspective of implementation of the exchange of information based on the CRS, the Act on Special Provisions of the Income Tax Act, the Corporation Tax Act and the Local Tax Act Incidental to Enforcement of Tax Treaties as well as the cabinet and ministerial ordinances thereunder were amended, and those who open a financial account with a financial institution located in Japan must submit a self-certification indicating the name of the jurisdiction of residence, etc. Each financial institution must report information pertaining to financial accounts of specific non-residents and the information is automatically exchanged with tax administrations of each jurisdiction on an annual basis.
Economic Security Promotion Act
In May 2022, the Act on the Promotion of Ensuring National Security through Integrated Implementation of Economic Measures (the “Economic Security Promotion Act”) was promulgated and became fully effective from May 2024. One of the purposes of the Economic Security Promotion Act is to ensure the stable provision of essential infrastructure services. For such purpose, certain designated essential infrastructure services providers are subject to prior filing and screenings by the Japanese government in relation to the installation and outsourcing of maintenance of critical facilities and the Japanese government may issue recommendations and orders based on the outcomes of such filings and screenings. These are to prevent critical facilities of essential infrastructure from being misused as a means to interfere with the stable provision of services from outside Japan. In November 2023, SMBC, SMBC Nikko Securities and Sumitomo Mitsui Card were designated as such essential infrastructure service providers that are subject to such filing and screening requirements.
Deregulation
The developments toward deregulation of the financial system including those described below have made the Japanese banking industry highly competitive.
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Deregulation of Bank Engagement in the Securities Business
The gradual relaxation of the restrictions under the Securities and Exchange Act allowed banks to engage in the following business lines, after taking appropriate registration measures with the FSA:
| • | underwriting and dealing in Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, commercial paper and certain bonds issued by special purpose companies; |
| • | selling beneficiary certificates of investment trusts and securities issued by an investment company; and |
| • | dealing in listed or OTC securities or derivatives transactions as well as in the securities intermediary business. |
In addition, amendments to the FIEA and the Banking Act relating to firewalls and conflicts of interest between banks, securities companies and insurance companies became effective on June 1, 2009. The amendment relating to firewalls abolished the ban on certain officers and employees from holding concurrent posts in banks, securities companies and insurance companies, and relaxed restrictions on the transfer of non-public customer information. On the other hand, the amendment relating to conflicts of interest requires those financial institutions, including banks, to implement proper information management procedures and to develop appropriate internal systems to prevent customer interests from being unfairly harmed through trading by the companies or by other companies within their group. For example, the companies may be required to create information barriers between departments and monitor how it executes transactions with customers. On June 30, 2021, amendments to the Cabinet Office Ordinance under the FIEA became effective, which relaxed the firewall regulations. These amendments allowed the sharing of non-public information, etc. related to foreign company customers within a financial group. In addition, on June 22, 2022, further amendments to the Cabinet Office Ordinance under the FIEA became effective. These amendments expanded the relaxed firewall regulation and allowed non-public information, etc. of certain subject companies such as listed companies, etc. to be shared within a financial group without the consent of such companies, but required financial institutions to establish measures to respond to a request from relevant companies for suspension of sharing of such non-public information, etc.
Deregulation of Insurance Products
The gradual deregulation of the financial services industry permitted banks in Japan to offer an increased variety of insurance products, including pension-type insurance to the full range, as an agent.
Privatization of Japan Post Holdings Co., Ltd.’s Subsidiaries
In December 2014, under the Postal Privatization Act, Japan Post Holdings Co., Ltd. (“Japan Post Holdings”), a joint stock corporation that holds shares of operating companies, published a plan for the listing of Japan Post Holdings, Japan Post Bank, one of the world’s largest deposit-taking institutions, and Japan Post Insurance Co., Ltd. (“Japan Post Insurance”) and the gradual disposition of its shares of Japan Post Bank and Japan Post Insurance down to approximately 50% ownership. In November 2015, each of Japan Post Holdings, Japan Post Bank and Japan Post Insurance publicly offered approximately 11% of their outstanding shares, respectively, and they were listed on the Tokyo Stock Exchange. In addition, Japan Post Holdings offered approximately 29% and 12% of Japan Post Bank’s outstanding shares in March 2023 and 2025, respectively. As a result, Japan Post Holdings’ ownership of Japan Post Bank’s outstanding shares fell below 50%, and Japan Post Bank is no longer required to receive prior approval of the Government of Japan to expand its business.
Regulations in the United States
As a result of its operations in the United States, the Company and SMBC are subject to extensive federal and state banking and securities supervision and regulation. SMBC engages in U.S. banking activities directly
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through its branches in Los Angeles, San Francisco and New York and through its representative offices in Houston, Dallas, Silicon Valley, Charlotte, Chicago and White Plains, New York. SMBC also controls a U.S. banking subsidiary, SMBC MANUBANK (formerly, Manufacturers Bank), and a U.S. broker-dealer subsidiary, SMBC Nikko Securities America, Inc. The Company and SMBC have established a U.S. bank holding company, SMBC Americas Holdings, Inc. (“SMBCAH”), a wholly-owned direct subsidiary of SMBC. SMBCAH is currently the holding company for SMBC MANUBANK, SMBC Nikko Securities America, Inc. and certain other U.S. subsidiaries. The establishment of SMBCAH enhances the Company’s and SMBC’s U.S. corporate governance capabilities by centralizing the supervision and management of its U.S. operations and bringing together its primary U.S.-based banking, securities, capital markets and other subsidiaries under the new holding company.
SMBC’s New York branch is supervised by the Federal Reserve Bank of New York and the New York State Department of Financial Services, but its deposits are not insured (or eligible to be insured) by the Federal Deposit Insurance Corporation (“FDIC”). SMBC’s Los Angeles and San Francisco branches are supervised by the Federal Reserve Bank of San Francisco and the California Department of Financial Protection and Innovation (“DFPI”), but their deposits are not insured (or eligible to be insured) by the FDIC. SMBC’s representative offices in Houston and Dallas are subject to regulation and examination by the Federal Reserve Bank of Dallas and the Texas Department of Banking. SMBC’s representative office in Silicon Valley is subject to regulation and examination by the Federal Reserve Bank of San Francisco and the California DFPI. SMBC’s representative office in Charlotte is subject to regulation and examination by the Federal Reserve Bank of Richmond and the North Carolina Office of the Commissioner of Banks. SMBC’s representative office in Chicago is subject to regulation and examination by the Federal Reserve Bank of Chicago and the Illinois Department of Financial and Professional Regulation. SMBC’s representative office in White Plains, New York is subject to regulation and examination by the Federal Reserve Bank of New York and the New York State Department of Financial Services.
SMBC MANUBANK is a California state-chartered bank with FDIC-insured deposits that is not a member of the Federal Reserve System. As such, SMBC MANUBANK is subject to regulation, supervision and examination by the FDIC and the California DFPI.
The Company, SMBC and SMBCAH are bank holding companies by virtue of their ownership of SMBC MANUBANK, and as such are subject to the U.S. Bank Holding Company Act of 1956 (codified at 12 U.S.C. 1841 et seq), as amended (“Bank Holding Company Act”), and are subject to regulation, supervision and examination by the Federal Reserve Board as their U.S. “umbrella supervisor.” The Company, SMBC and SMBCAH are required to serve as sources of financial strength to SMBC MANUBANK.
Restrictions on Business Activities
The Bank Holding Company Act prohibits, in principle, the bank holding company (here, the Company and SMBC) from engaging in, either directly or through their subsidiaries, activities outside of (i) banking activities, (ii) managing or controlling banks and other subsidiaries authorized under the Bank Holding Company Act, or (iii) activities closely related to banking, or managing or controlling banks as to be a proper incident thereto. However, if a bank holding company meets certain requirements and obtains the status of a financial holding company, it can also engage, either directly or through its nonbank subsidiaries, in the U.S. and abroad, in financial activities, either de novo or by acquisition, by providing after-the-fact notice to the Federal Reserve Board. In this regard, the following, for example, are delineated as activities that are financial in nature.
| • | Lending, exchanging, transferring, investing for others, or safeguarding money or securities. |
| • | Insuring, guaranteeing, or indemnifying against loss, harm, damage, illness, disability, or death, or providing and issuing annuities, and acting as principal, agent, or broker for purposes of the foregoing, in any State. |
| • | Underwriting, dealing in, or making a market in securities. |
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| • | Making merchant banking investments in non-financial companies for a limited period of time, as long as the financial holding company does not directly or indirectly manage the non-financial companies’ day-to-day activities, and the financial holding company’s banking subsidiaries engage only in permitted cross-marketing with the non-financial companies. |
Unless otherwise limited by the Federal Reserve Board, financial holding companies generally can engage in financial-in-nature activities by providing written notice describing the activity commenced or conducted by a company it acquires not later than 30 calendar days after commencing the activity or consummating an acquisition, as the case may be.
The Company, SMBC and SMBCAH have all elected to be treated as financial holding companies. The Company, SMBC, SMBCAH and SMBC MANUBANK, as our U.S. insured depository institution subsidiary, are required to be “well capitalized” and “well managed,” including maintenance of examination ratings that are at least satisfactory, in order for the Company, SMBC, and SMBCAH to continue to be treated as financial holding companies. In April 2019, SMBC and its New York branch entered into a written agreement with the Federal Reserve Bank of New York requiring SMBC and its New York branch to address certain deficiencies relating to the New York branch’s anti-money laundering and economic sanctions compliance program. SMBC and its New York branch are required, among other things, to implement corrective measures and submit periodic progress reports to the Federal Reserve Bank of New York. Furthermore, because of the deficiencies identified in the written agreement, we no longer meet the requirements to be treated as a financial holding company. Additionally, pending completion of a remediation plan to fulfill these requirements, we are currently subject to constraints on our ability to pursue certain new categories of financial activities and execute acquisitions of companies engaged in financial activities in the United States. Failure to rectify the underlying conditions that have given rise to these restrictions within the prescribed timeframe may necessitate the divestiture or cessation of certain business activities in the United States.
Under the Bank Holding Company Act, the Company, SMBC and SMBCAH are also required to obtain the prior approval of the Federal Reserve Board before directly or indirectly acquiring the ownership or control of more than 5% of the outstanding shares of any class of voting securities of U.S. banks, certain other depository institutions and bank or depository institution holding companies. In addition, SMBC’s U.S. banking operations (including SMBC MANUBANK and SMBC’s U.S. branches) are also restricted from engaging in certain “tying” arrangements where a bank conditions the availability or price of one product on a requirement that the customer also obtain another product from the bank or an affiliate of the bank.
Section 13 of the Bank Holding Company Act (codified at 12 U.S.C. 1851), known as the Volcker Rule, which was added by Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) imposes restrictions on the ability of banking entities such as the Company, SMBC, SMBCAH and SMBC MANUBANK and most of their affiliates, to engage as principal in proprietary trading activities, or sponsor, invest in, or retain investments in certain private equity, hedge or similar funds, subject to a number of exclusions and exemptions, including ones that limit the Volcker Rule’s extraterritorial reach.
Other Prudential Restrictions
SMBC’s U.S. branches and SMBC MANUBANK are subject to requirements and restrictions under U.S. federal and state law, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans that may be made and limitations on the types of investments that may be made and the types of services that may be offered. Various consumer laws and regulations also affect the operations of SMBC MANUBANK, and to a limited extent, SMBC’s New York and California branches.
In addition, under U.S. federal banking laws, state-chartered banks (such as SMBC MANUBANK) and state-licensed branches and agencies of foreign banks (such as SMBC’s New York branch) may not, as a general
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matter, engage as a principal in any type of activity not permissible for their federally chartered or licensed counterparts, unless (i) in the case of state-chartered banks, the FDIC determines that the additional activity would pose no significant risk to the FDIC’s Deposit Insurance Fund and is consistent with sound banking practices and (ii) in the case of state-licensed branches and agencies of foreign banks, the Federal Reserve Board determines that the additional activity is consistent with sound banking practices. The U.S. federal banking laws also subject state branches and agencies of foreign banks to the same single-borrower lending limits that apply to federal branches or agencies, which are substantially similar to the lending limits applicable to national banks. For SMBC’s U.S. branches, these single-borrower lending limits are based on the worldwide capital of SMBC.
Under the International Banking Act, the Federal Reserve Board may terminate the activities of any U.S. office of a foreign bank if it determines (i) that the foreign bank is not subject to comprehensive supervision on a consolidated basis in its home country (unless the home country is making demonstrable progress toward establishing such supervision), (ii) that there is reasonable cause to believe that such foreign bank or its affiliate has violated the law or engaged in an unsafe or unsound banking practice in the United States and, as a result of such violation or practice, the continued operation of the U.S. office would be inconsistent with the public interest or with the purposes of federal banking laws, or (iii) for a foreign bank that presents a risk to the stability of the United States financial system, the home country of the foreign bank has not adopted, or made demonstrable progress toward adopting, an appropriate system of financial regulation to mitigate such risk.
There are various qualitative and quantitative restrictions on the extent to which the Company and its subsidiaries can borrow or otherwise obtain credit from SMBC MANUBANK or engage in certain other transactions involving that subsidiary. In general, these transactions must be on terms that would ordinarily be offered by SMBC MANUBANK to unaffiliated entities, and credit transactions must be secured by designated amounts of specified collateral. In addition, certain transactions, such as certain purchases by SMBC MANUBANK from SMBC or its non-bank subsidiaries, are subject to volume limitations. Credit exposure arising from derivative transactions, securities borrowing and lending transactions, and repurchase/reverse repurchase agreements is subject to these collateral and volume transactions limitations.
U.S. Financial Regulatory Reform
Both the scope of the U.S. laws and regulations and the intensity of supervision have increased in recent years, including in response to recent high-profile failures of large state-chartered banks, which heightens the uncertainty about upcoming regulatory reforms and their potential impacts on our and SMBC’s business activities in the United States. Regulatory enforcement and fines have also increased across the banking and financial services sector. We expect the Trump administration will seek to implement a regulatory reform agenda that is significantly different than that of the Biden administration, potentially impacting the rulemaking, supervision, examination, and enforcement priorities of the federal banking agencies.
The Dodd-Frank Act provides a broad framework for addressing, among other issues, systemic risk oversight, bank capital standards, the resolution of failing systemically significant financial institutions, OTC derivatives, the ability of banking entities to engage in proprietary trading activities and invest in hedge funds and private equity funds, consumer and investor protection, and securitization. Under the Dodd-Frank Act, the Federal Reserve Board has imposed greater capital, leverage and liquidity requirements and other heightened prudential standards for bank holding companies and foreign banking organizations that exceed certain thresholds. In imposing heightened prudential standards on foreign banking organizations such as us and SMBC, the Federal Reserve Board is directed to take into account the principle of national treatment and equality of competitive opportunity, and the extent to which the non-U.S. bank holding company is subject to comparable home country standards.
The Federal Reserve Board has adopted rules that apply enhanced prudential standards to large foreign banking organizations (“EPS Rules”), including us. The EPS Rules require certain foreign banking organizations, such as us, to certify that they are subject to home country capital standards that are broadly consistent with the
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Basel capital framework, including Basel III; conduct home country capital stress tests that are comparable to U.S. standards; comply with certain liquidity requirements, including, among other things, a U.S. liquidity buffer requirement for its U.S. branches and agencies based on the results of internal liquidity stress testing; and establish a U.S. risk committee that periodically reviews the risk management policies and oversees the risk management framework of its U.S. operations. The EPS Rules also require foreign banking organizations with combined U.S. assets (excluding assets held by its U.S. branches and agencies) of $50 billion or more to establish a separately capitalized top-tier U.S. intermediate holding company. We are not subject to this requirement because we do not meet this threshold, but we have established SMBCAH in consideration of this requirement.
As part of the implementation of the EPS Rules, the Federal Reserve Board published a rule implementing single counterparty credit limits (“SCCL”) applicable to the U.S. operations of certain foreign banking organizations, such as us. The SCCL rule, being applied from July 1, 2021, in general imposes limitations on net credit exposures to individual counterparties (aggregated based on affiliation) as a percentage of Tier 1 capital. We may comply with the SCCL rule by certifying to the Federal Reserve Board that we comply with a home country regime (“Home Country SCCL”) on a consolidated basis that is consistent with the Large Exposures Framework published by the Basel Committee going forward. Japanese Home Country SCCL is intended to be consistent with the Large Exposures Framework, and we intend to comply with the Federal Reserve Board’s SCCL rule through substituted compliance.
The Dodd-Frank Act removed a longstanding prohibition on the payment of interest on demand deposits that was applicable to banking entities such as SMBC MANUBANK and SMBC’s three branches in the United States. In addition, SMBC MANUBANK and SMBC’s three branches in the United States are subject to federal lending limits that take into account credit exposure arising from derivative transactions and securities lending, securities borrowing, and repurchase agreements and reverse repurchase agreements with counterparties as well as state lending limits.
The Dodd-Frank Act also provides for an extensive framework for the regulation of OTC derivatives, including mandatory clearing, exchange trading and transaction reporting of certain OTC derivatives. In addition, certain entities are required to register with the CFTC as “swap dealers” or “major swap participants” or with the SEC as “security-based swap dealers” or “major security-based swap participants.” Our subsidiary, SMBC Capital Markets, Inc., is registered as a swap dealer. There are various mandatory clearing, trade execution and reporting requirements for swaps. We do not currently expect to register any entity with the SEC as a security-based swap dealer or major security-based swap participant.
Furthermore, the Dodd-Frank Act required the SEC to establish rules requiring issuers with listed securities, which includes non-U.S. private issuers such as us, to establish a “clawback” policy to recoup previously awarded compensation in the event of an accounting restatement. In October 2022, the SEC adopted rules requiring stock exchanges, such as the NYSE on which our ADSs are listed, to establish new listing rules that set minimum standards for clawback policies to recover incentive-based compensation erroneously paid to current and former executive officers due to accounting restatements. The stock exchange listing rules became effective on October 2, 2023. The Dodd-Frank Act also expands the extraterritorial jurisdiction of U.S. courts over actions brought by the SEC or the United States with respect to violations of the antifraud provisions in the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940.
In July 2023, the U.S. federal bank regulatory agencies issued a Notice of Proposed Rulemaking (“NPR”) for the implementation of the Final Basel III reforms in the U.S., with a comment period that closed in January 2024. If adopted as proposed, the NPR would implement the most wide-ranging and significant changes to the U.S. capital rules since 2013, requiring Category I-IV banking organizations and their depository institution subsidiaries to calculate risk-weighted assets under both the current standardized approach and a new, more risk sensitive, approach, referred to as the “Expanded Risk-Based Approach.” The calculation of total risk-weighted assets under the Expanded Risk-Based Approach would include standardized approaches for credit risk, operational risk and credit valuation adjustment risk, as well as a new approach for market risk that would be
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based on internal models and standardized supervisory models. If SMBCAH became designated as our U.S. intermediate holding company for purposes of the EPS Rules (because it passed the applicable asset threshold thereunder), then under the proposal as adopted, SMBCAH and its depository institution subsidiaries would be subject to minimum capital requirements and buffer requirements based on capital ratios determined under both the current standardized approach and the Expanded Risk-Based Approach. However, change in leadership at the U.S. federal banking agencies following the 2024 U.S. presidential election has made it uncertain if and when, a final rule will be adopted, and if so adopted, whether and to what extent it will differ from the NPR. As a result, the timing and content of any final rule, and the potential effects of any final rule on our and SMBC’s business activities in the United States, remain uncertain.
In August 2023, the U.S. federal banking agencies issued a joint NPR on long-term debt (“LTD”) requirements that would make limited amendments to the existing U.S. total loss-absorbing capacity (“TLAC”) rules and would extend the LTD and clean-holding company portions of the Federal Reserve’s existing TLAC rule for U.S. G-SIBs and U.S. intermediate holding companies of foreign G-SIBs to all large banking organizations with U.S.$ 100 billion or more in total assets (which would include SMBCAH, if SMBCAH became designated as our U.S. intermediate holding company for purposes of the Federal Reserve’s EPS Rule), subject to only a few amendments to the existing U.S. TLAC rule and with no material differences between the TLAC and LTD requirements applicable to G-SIBs and non-G-SIBs. The comment deadline for the proposal was originally November 30, 2023 and was later extended to January 16, 2024.
Laws Prohibiting Money Laundering and Terrorist Financing
The Bank Secrecy Act/Anti-Money Laundering Regulation in the U.S.
The Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001 (“PATRIOT Act”) and the Anti-Money Laundering Act of 2020 contains measures to prevent and detect the financing of terrorism and international money laundering by imposing significant compliance and due diligence obligations, creating crimes, providing for penalties and expanding the extraterritorial jurisdiction of the United States. The Bank Secrecy Act, as amended, imposes anti-money laundering compliance obligations on U.S. financial institutions, including the U.S. offices of foreign banks. The passage of the PATRIOT Act and other events have resulted in heightened scrutiny of compliance with the Bank Secrecy Act and anti-money laundering rules by federal and state regulatory and law enforcement authorities.
U.S. Sanctions Targeting Iran Related Activities
Starting in 2010, the U.S. government implemented various sanctions targeting non-U.S. parties that engage in specified Iran-related activities. Various statutes, Executive Orders and regulations, including the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 (which, among other things, amended the Iran Sanctions Act of 1996), Section 1245 of the National Defense Authorization Act for Fiscal Year 2012, the Iran Threat Reduction and Syria Human Rights Act of 2012, and the Iran Freedom and Counter-Proliferation Act of 2012, authorize the imposition of sanctions on parties that engage in, among other things, certain activities relating to Iran’s energy, petroleum, metals, shipping or shipbuilding sectors or that facilitate “significant” transactions or provide “significant financial services” for certain Iran-linked individuals or entities or the Islamic Revolutionary Guard Corps. Persons engaged in targeted activities involving Iran face exposure to secondary sanctions or enforcement actions under U.S. law. It is SMBC’s policy not to conduct activities that are impermissible under secondary sanctions.
Prior to the U.S. withdrawal from the JCPOA, the United States, along with the European Union, provided Iran with certain sanctions relief. On Implementation Day, the U.S. government revoked certain Iran-related Executive Orders, temporarily waived certain statutory provisions and removed various individuals and entities from the Specially Designated Nationals and Blocked Persons List (the “SDN List”) maintained by OFAC. However, certain U.S. secondary sanctions targeting Iran remained in effect, including those targeting significant transactions involving Iranian or Iran-related SDNs or the Islamic Revolutionary Guard Corps.
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In November 2018, following certain wind-down periods, the United States fully re-imposed sanctions (both primary and secondary) that had been waived or lifted under the JCPOA. On the same day, OFAC added back to the SDN List a number of parties that had been removed on Implementation Day from the list. Persons engaged in targeted activities involving Iran face exposure to secondary sanctions or enforcement actions under U.S. law. It is SMBC’s policy not to conduct activities that are impermissible under secondary sanctions. Additionally, in 2019 and 2020, during his first term, President Trump issued further Iran-related Executive Orders, including orders authorizing sanctions with respect to additional sectors of the Iranian economy, including metals, mining, manufacturing, textiles, construction, and other sectors identified by the Secretary of the Treasury. Pursuant to one of these orders, Executive Order 13902, on October 8, 2020, the Secretary of the Treasury identified the financial sector of the Iranian economy as subject to sanctions and OFAC added 18 major Iranian banks to the SDN List. As a result of this action, non-U.S. financial institutions that engage in non-humanitarian transactions involving the listed 18 banks may be targeted by secondary sanctions.
After a transition period in which certain countries, including Japan, were granted temporary “significant reduction exceptions” that permitted some purchases of oil from Iran to continue without risking sanctions, the United States also fully resumed efforts to reduce Iran’s crude oil sales, backed by the potential threat of correspondent account sanctions targeting foreign financial institutions. These exceptions expired in May 2019 without further extension. Additional Iran-related sanctions were imposed during both the first Trump administration and the Biden administration, and the European Union joined the United States to impose sanctions on Iranian individuals and entities in response to Iran’s treatment of protestors and provision of material support to Russia’s aggression against Ukraine.
On February 4, 2025, President Trump issued a National Security Presidential Memorandum (NSPM-2) that directed U.S. government agencies to implement a “maximum pressure” sanctions enforcement policy against Iran. Pursuant to this policy, the U.S. government has recently sanctioned a number of Iranian and non-Iranian persons for involvement in the purchase or transportation of Iranian oil and other activities of concern. Additional sanctions enforcement policies are likely in the future.
U.S. Sanctions Relating to Russia and Ukraine
In response to Russia’s aggression against Ukraine in February 2022, the U.S. government has imposed significant sanctions and export control measures targeting Russia. In broad terms, the U.S. restrictions enacted to date include: territorial embargoes on the Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine, prohibitions on trade in certain goods and services between the United States and Russia and new investment in Russia by U.S. persons, asset blocking sanctions on a number of Russian individuals and entities, restrictions on transactions involving certain Russian financial institutions and Russia’s Central Bank, National Wealth Fund, and Ministry of Finance, and restrictions on dealing in Russian sovereign debt and debt or equity of certain Russian companies. In December 2023, President Biden issued Executive Order 14114, which authorizes the imposition of sanctions on non-U.S. financial institutions that engage in significant transactions involving persons sanctioned by the U.S. government for operating in the technology, defense and related materiel, construction, aerospace, or manufacturing sectors of the Russian Federation economy or involving Russia’s military-industrial base. On June 12, 2024, the U.S. Treasury Department announced that it was broadening the definition of Russia’s military-industrial base to include all persons blocked pursuant to Executive Order 14024, meaning that non-U.S. financial institutions risk being sanctioned for conducting or facilitating significant transactions, or providing any service, involving such blocked persons. While the Trump administration has signaled some openness to easing Russia-related sanctions in connection with efforts to reach a political resolution to the conflict in Ukraine, it is unclear when or if this may occur, and it is also possible that additional or expanded sanctions may be imposed in the future. The 2022 and 2023 Russia-related sanctions are in addition to sanctions previously enacted by the U.S. government in response to Russia’s 2014 annexation of Crimea, including those under the U.S. Ukraine-/Russia-Related Sanctions Regulations, the Ukraine Freedom Support Act of 2014 (signed into law on December 18, 2014), as amended by the Countering America’s Adversaries Through Sanctions Act of 2017 (signed into law in August 2017) (the “UFSA” ), and “sectoral”
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sanctions on the financial, energy and defense sectors of the Russian economy. The UFSA mandates prohibitions or strict limitations on the opening or maintaining of correspondent or payable-through accounts in the United States by non-U.S. financial institutions determined by the U.S. government (i) to have knowingly engaged in on or after December 18, 2014 in significant transactions involving certain activities described in the Act, including those involving individuals or entities on whom sanctions are imposed pursuant to the Act for making a significant investment in a project for the extraction of deepwater, Arctic offshore or shale formation crude oil in Russia, or (ii) to have knowingly facilitated, on or after June 16, 2015, a significant financial transaction on behalf of any Russian individual or entity included on the SDN List pursuant to Ukraine-related sanction programs.
U.S. Sanctions Relating to China
The United States government has imposed sanctions and other restrictive measures, and taken other steps, in response to a number of concerns with the actions and policies of the Chinese government. In response to Chinese actions to limit the autonomy of Hong Kong, the U.S. government enacted the Hong Kong Autonomy Act (signed into law on July 14, 2020) which is implemented by Executive Order 13936. Among other things, the Act provides for the imposition of asset-blocking sanctions against any non-U.S. persons determined to be materially contributing to, have materially contributed to, or have attempted to materially contribute to the failure of the Government of China to meet its obligations under the Sino-British Joint Declaration or Hong Kong’s Basic Law. The Act also mandates the imposition of sanctions against non-U.S. financial institutions determined by the U.S. government to have knowingly conducted a significant transaction involving persons sanctioned under the Act. The U.S. State and Treasury Departments are required to periodically submit reports to Congress identifying non-U.S. persons and non-U.S. financial institutions sanctioned under the Act. To date, 39 foreign persons (principally Chinese and Hong Kong government and security officials) have been identified as subject to asset-blocking sanctions under the Act and Executive Order 13936. No non-U.S. financial institutions have been determined to be subject to sanctions under the Act. The U.S. government has indicated that it will contact any non-U.S. financial institution it believes to be engaged in sanctionable conduct under the Act prior to imposing sanctions against it.
In response to concerns that companies linked to the Chinese military have used access to U.S. capital markets to improve Chinese military and intelligence capabilities, in November 2020, during his first term, President Trump issued Executive Order 13959, which was subsequently amended in January 2021 by Executive Order 13974. In June 2021, President Biden issued Executive Order 14032, which further amended Executive Order 13959 to rescind the Trump administration sanctions and replace them with similar restrictions applicable to a modified list of Chinese companies operating in the defense or surveillance technology sectors of the Chinese economy. As amended by Executive Order 14032, Executive Order 13959 prohibits U.S. persons from purchasing or selling publicly traded securities issued by the companies named in the Annex to or designated pursuant to the order, as well as publicly traded securities that are derivatives of or provide investment exposure to such securities. The amended order’s prohibitions became effective in August 2021 with respect to securities of or linked to companies named in the Annex to the order, and will take effect 60 days after the date of listing for companies named pursuant thereto. Executive Order 13959, as amended, provides a 365-day period from the date of the relevant company’s listing in or pursuant to the order during which U.S. persons may purchase or sell affected securities for purposes of divestment. On February 21, 2025, President Trump issued a memorandum concerning his “America First Investment Policy” that, among other things, directed U.S. government agencies to evaluate whether additional sanctions pursuant to Executive Order 13959, as amended, are appropriate.
The United States has also taken steps in response to concerns about Chinese actions in the Xinjiang Uyghur Autonomous Region (“Xinjiang”). Pursuant to the Global Magnitsky Human Rights Accountability Act and Executive Order 13818, which authorize the imposition of sanctions against persons in any country determined to be involved in certain human rights abuses, the U.S. government has named a number of Chinese government officials and entities to the SDN List. The sanctioned entities include the Xinjiang Production and Construction Corps (“XPCC”) and its subsidiaries. In July 2020, several U.S. government agencies jointly published an
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advisory concerning risks and considerations for businesses with supply chain exposure to entities engaged in forced labor and other human rights abuses in Xinjiang. The advisory highlights legal, economic, and reputational risks to U.S. and non-U.S. companies with potential exposure in their supply chain to Xinjiang or to facilities outside Xinjiang that use labor or goods from that region and recommends that such businesses implement human rights-related due diligence policies and procedures. In December 2021, President Biden signed into law the Uyghur Forced Labor Prevention Act, which establishes a rebuttable presumption, effective June 21, 2022, that goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in Xinjiang may not be imported into the United States. In June 2022, U.S. government agencies published additional guidance concerning this restriction and on due diligence best practices.
U.S. Sanctions Relating to Burma
In February 2021, in response to the military coup in Burma, President Biden issued Executive Order 14014, which authorizes the imposition of sanctions, among others, against persons responsible for undermining democratic processes and institutions in Burma, Burmese government and military officials, and immediate family members of such persons, as well as Burmese government agencies or instrumentalities and entities operating in the defense sector of the Burmese economy or other sectors identified by the Secretary of the Treasury. Pursuant to the Order, OFAC has imposed sanctions on a number of Burmese government and military officials and their associates, as well as on state-owned gem, pearl, oil and lumber enterprises, state holding companies, certain state-owned banks, and certain persons operating in the jet fuel sector of the Burmese economy. Sanctions against additional individuals and entities are possible in the future.
Foreign Account Tax Compliance Act
Provisions of the U.S. tax law commonly referred to as the Foreign Account Tax Compliance Act (“FATCA”), which became effective on July 1, 2014, aim to prevent U.S. persons from hiding their financial assets or evading their U.S. federal income tax obligations by the use of offshore accounts. A foreign financial institution that has entered into an agreement with the U.S. Internal Revenue Service (“IRS”) pursuant to which it agrees to comply with FATCA, referred to as a “participating foreign financial institution” (“PFFI”), is required to perform specified due diligence, reporting and withholding functions (a “PFFI agreement”). Specifically, under FATCA, a PFFI is required to ascertain the U.S. status of customers through specified due diligence and report certain information annually to the IRS. In cases where customers are not compliant with FATCA, PFFIs are obligated to carry out specified reporting and withholding procedures as prescribed. The consequences for foreign financial institutions that are not compliant with FATCA include being subjected to a 30% withholding tax on certain withholdable payments from U.S. sources and reporting to the IRS.
The United States entered into intergovernmental agreements or reached agreements in substance with more than 100 countries in furtherance of the objectives of FATCA, which modify the operation of FATCA with respect to financial institutions located in those countries. The United States and Japan have entered into an intergovernmental agreement to facilitate the implementation of FATCA pursuant to which Japanese financial institutions (such as us and certain of SMBC Group companies) are directed by the Japanese authorities to register with the IRS and fulfill obligations consistent with those required under a PFFI agreement. We are registered with the IRS as a PFFI. We are committed to complying with FATCA as a PFFI and abiding by the terms of our PFFI agreement with the IRS within the jurisdictions in which we operate and in accordance with the time frame set out by the IRS. We closely monitor FATCA developments and evolving industry practices to ensure continued compliance with FATCA.
Other Regulations in the United States
In the United States, SMBC’s U.S.-registered broker-dealer subsidiary, SMBC Nikko Securities America, Inc. is regulated by the SEC. Broker-dealers are subject to regulations that cover all aspects of the securities business, including:
| • | sales practices; |
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| • | trade practices of broker-dealers; |
| • | use and safekeeping of customers’ funds and securities; |
| • | capital structure; |
| • | record-keeping; |
| • | the financing of customers’ purchases; and |
| • | the conduct of directors, officers and employees. |
In addition, SMBC Nikko Securities America, Inc. is a member of and regulated by the Financial Industry Regulatory Authority and is regulated by the individual state securities authorities in the states in which it operates. The U.S. government agencies and self-regulatory organizations, as well as state securities authorities in the United States having jurisdiction over SMBC’s U.S. broker-dealer affiliate, are empowered to conduct administrative proceedings that can result in, among other things, censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer or its associated persons, including directors, officers or employees.
Regulations in Other Jurisdictions
Elsewhere in the world, our operations are subject to regulation and control by local central banks and monetary authorities.
Disclosure Pursuant to Section 13(r) of the Securities Exchange Act of 1934
Section 13(r) of the Securities Exchange Act of 1934, as amended, requires an issuer to disclose whether it or any of its affiliates knowingly engaged in certain activities or transactions relating to Iran or with individuals or entities designated by the U.S. government under specified Executive Orders, even if those activities are not prohibited by U.S. law and are conducted outside the United States by non-U.S. affiliates. During the twelve months ended March 31, 2025, SMBC, an affiliate of SMFG engaged in activities subject to disclosure under Section 13(r). SMBC conducted these activities consistent with its internal policies and procedures, the policies and procedures of SMFG, and applicable laws and regulations, and to the extent they are not sanctionable under U.S. secondary sanctions. SMBC has discontinued activities that have become impermissible or subject to secondary sanctions as a result of changes in applicable laws and regulations.
SMBC provided remittance and other settlement services in connection with customers’ trade transactions between Japan and Iran. These transactions principally involved the exportation of civilian commercial products including medical devices from Japan and were conducted with an Iranian bank owned by the Government of Iran. These transactions did not involve entities or other persons listed on the SDN List at the time of the transaction and did not involve the settlement of U.S. dollar-denominated payments cleared through U.S. banks. SMBC has informed SMFG that it intends to continue to engage in these types of transactions only to the extent permitted under applicable regulations and to the extent they are not sanctionable under U.S. secondary sanctions. For the twelve months ended March 31, 2025, the gross revenue related to these transactions was ¥1.2 million, representing less than 0.0001% of SMFG’s total interest and fee income. SMFG does not allocate direct costs to interest and fee income and therefore does not calculate net profits with respect to these transactions.
SMBC has issued performance bonds and advance payment bonds that supported various projects, including the construction of petroleum plants in Iran. Some of these bonds had counterparties that were entities controlled by the Government of Iran. Some of these bonds have matured, and SMBC has not renewed and will not renew them unless permitted under applicable regulations and to the extent they are not sanctionable under U.S. secondary sanctions, but SMBC continues to have obligations under the matured performance bonds until they
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are returned or cancelled by the beneficiaries. SMBC has also received fees from its customers on whose behalf it issued the performance bonds. For the twelve months ended March 31, 2025, the gross revenue relating to these transactions was ¥0.5 million, representing less than 0.0001% of SMFG’s total interest and fee income. As noted above, SMFG does not allocate direct costs to interest and fee income and therefore does not calculate net profits with respect to these transactions. SMBC has informed SMFG that it intends to continue to accept fee income from its customers for whose account the performance bonds were issued and to pay the relevant fees to the Iranian banks, to the extent authorized by the Ministry of Finance of Japan or otherwise permitted under applicable regulations, until the bonds are returned or cancelled. However, SMBC strongly urges the relevant customers to ask the beneficiaries to agree to return or cancel the matured performance bonds.
SMBC has frozen the U.S. dollar accounts of all Iranian banks. SMBC has frozen Japanese yen accounts of government-owned Iranian banks, including an account for the Central Bank of Iran; all such accounts were frozen at the time of the designation of the relevant bank under Executive Order 13224 or 13902, as applicable. Certain transactions described in this disclosure were conducted through the use of one of such accounts prior to the designation of the relevant bank under Executive Order 13902. These transactions were conducted in accordance with Japanese law, and we do not believe that the transactions were sanctionable under U.S. sanctions that were in effect at the time the transactions occurred. SMBC has discontinued activities that have become impermissible or subject to secondary sanctions as a result of changes in applicable laws and regulations, including transactions involving the Central Bank of Iran whose account has been frozen. The gross revenue attributable to the accounts of government-owned Iranian banks for the twelve months ended March 31, 2025, was ¥25.3 million, representing about 0.0003% of SMFG’s total interest and fee income. SMFG does not allocate direct costs to interest and fee income and therefore does not calculate net profits with respect to these transactions. SMBC has informed SMFG that it intends to continue to maintain the Iranian accounts described above only to the extent permitted under applicable laws and regulations and to the extent the activities are not targeted by secondary sanctions.
As of the date of this annual report, to our knowledge, there is no other activity for the twelve months ended March 31, 2025 that requires disclosure under Section 13(r) of the Securities Exchange Act of 1934.
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4.C. ORGANIZATIONAL STRUCTURE
The following chart presents our corporate structure summary at March 31, 2025.
| (1) | These companies are our associates or joint ventures. |
| (2) | Chart indicates the classification of SMBC Group companies into each of SMBC Group-wide business segments. |
| (3) | The Bank of East Asia, Limited is no longer our associate, due to a reduction in our shareholding on May 14, 2025 and changes in the representation on its board of directors. |
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As the ultimate holding company of the SMBC Group, we are responsible for:
| • | group strategy and management; |
| • | group resource allocation; |
| • | group financial accounting; |
| • | investor relations; |
| • | capital strategy; |
| • | group IT strategy; |
| • | HR management for group executives; |
| • | group risk management, internal control and compliance; |
| • | compensation schemes; and |
| • | efficiently harmonizing our operations on an SMBC Group-wide basis. |
Principal Subsidiaries
Our principal subsidiaries at March 31, 2025 are shown in the list below. We consolidate all entities that we control. We control an entity when we are exposed, or have rights, to variable returns from our involvement with the entity and have the ability to affect those returns through our power over the entity.
Principal domestic subsidiaries
| Company Name |
Proportion of Ownership Interest(1) |
Proportion of Voting Rights(1) |
Main Business | |||||||
| (%) | (%) | |||||||||
| Sumitomo Mitsui Banking Corporation |
100.0 | 100.0 | Commercial banking | |||||||
| SMBC Trust Bank Ltd. |
100.0 | 100.0 | Trust Banking | |||||||
| SMBC Guarantee Co., Ltd. |
100.0 | 100.0 | Credit guarantee | |||||||
| SMBC Nikko Securities Inc. |
100.0 | 100.0 | Securities | |||||||
| Sumitomo Mitsui Card Company, Limited |
100.0 | 100.0 | Credit card | |||||||
| SMBC Consumer Finance Co., Ltd. |
100.0 | 100.0 | Consumer lending | |||||||
| JRI Holdings, Limited |
100.0 | 100.0 | Business management | |||||||
| The Japan Research Institute, Limited |
100.0 | 100.0 | System development, data processing, management consulting and economic research | |||||||
| Sumitomo Mitsui DS Asset Management Company, Limited |
50.1 |
|
50.1 | Investment management, and investment advisory and agency | ||||||
| Alternative Investment Capital Limited |
60.0 | 60.0 | Investment management and investment advisory | |||||||
| SMBC Venture Capital Co., Ltd. |
100.0 | 100.0 | Venture capital | |||||||
| SMBC Consulting Co., Ltd. |
98.3 | 98.3 | Management consulting and information services | |||||||
| Japan Pension Navigator Co., Ltd. |
69.7 | 69.7 | Operational management of defined contribution pension plans | |||||||
| (1) | Percentages of proportion of ownership interest and proportion of voting rights have been truncated. |
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Principal foreign subsidiaries
| Company Name |
Country of Incorporation |
Proportion of Ownership Interest(1) |
Proportion of Voting Rights(1) |
Main Business | ||||||||
| (%) | (%) | |||||||||||
| SMBC Bank International plc |
U.K. | 100.0 | 100.0 | Commercial banking | ||||||||
| Sumitomo Mitsui Banking Corporation (China) Limited |
China | 100.0 | 100.0 | Commercial banking | ||||||||
| PT Bank SMBC Indonesia Tbk |
Indonesia | 98.5 | 91.0 | (2) | Commercial banking | |||||||
| SMBC Americas Holdings, Inc. |
U.S.A. | 100.0 | 100.0 | Bank holding company | ||||||||
| SMBC MANUBANK |
U.S.A. | 100.0 | 100.0 | Commercial banking | ||||||||
| Banco Sumitomo Mitsui Brasileiro S.A. |
Brazil | 100.0 | 100.0 | Commercial banking | ||||||||
| JSC Sumitomo Mitsui Rus Bank |
Russia | 100.0 | 100.0 | Commercial banking | ||||||||
| SMBC Bank EU AG |
Germany | 100.0 | 100.0 | Commercial banking | ||||||||
| Sumitomo Mitsui Banking Corporation Malaysia Berhad |
Malaysia | 100.0 | 100.0 | Commercial banking | ||||||||
| SMBC Leasing and Finance, Inc. |
U.S.A. | 100.0 | 100.0 | Leasing | ||||||||
| SMBC Nikko Securities America, Inc. |
U.S.A. | 100.0 | 100.0 | Securities | ||||||||
| SMBC Nikko Capital Markets Limited |
U.K. | 100.0 | 100.0 | Securities | ||||||||
| SMBC Capital Markets, Inc. |
U.S.A. | 100.0 | 100.0 | Derivatives | ||||||||
| TT International Asset Management Ltd |
U.K. | 100.0 | 100.0 | Investment management, and investment advisory and agency | ||||||||
| SMFG India Credit Company Limited |
India | 100.0 | 100.0 | Financial services | ||||||||
| (1) | Percentages of proportion of ownership interest and proportion of voting rights have been truncated. |
| (2) | During the fiscal year ended March 31, 2020, we disposed of a 3.7% equity interest in PT Bank SMBC Indonesia Tbk (formerly known as PT Bank BTPN Tbk) to a third-party investor. Subsequently, in the fiscal year ended March 31, 2024, we disposed of an additional 3.7% to other third-party investors. The disposals were undertaken to ensure that PT Bank SMBC Indonesia Tbk is compliant with the free float requirement under the Indonesia Stock Exchange’s Rule. We had also entered into a commercial arrangement where the economic exposure resulting from the disposals is being retained. Therefore, the disposals have not resulted in a decrease in our ownership interests. |
4.D. PROPERTY, PLANT AND EQUIPMENT
We own or lease the land and buildings in which we conduct our business. Most of the property that we operate in Japan is owned by us to be used by our branches. In contrast, our international operations are conducted out of leased premises. Our head office building in Marunouchi is leased from a third party. Our largest property is SMBC’s East Tower in Marunouchi, with a net carrying value of ¥161 billion, including the land and building, at March 31, 2025.
The following table shows the net carrying amount of our tangible fixed assets at March 31, 2025.
| At March 31, 2025 | ||||
| (In millions) | ||||
| Land |
¥ | 468,319 | ||
| Buildings |
335,181 | |||
| Right of use assets |
366,569 | |||
| Others |
148,933 | |||
|
|
|
|||
| Total |
¥ | 1,319,002 | ||
|
|
|
|||
For further information, refer to Note 12 “Property, Plant and Equipment” to our consolidated financial statements included elsewhere in this annual report.
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The total area of land related to our material office and other properties at March 31, 2025 was approximately 548,000 square meters for owned land and approximately 13,000 square meters for leased land.
We are not aware of any material environmental issues that may affect the utilization of our assets.
| Item 4A. | Unresolved Staff Comments |
None
| Item 5. | Operating and Financial Review and Prospects |
The discussion below should be read together with “Item 3.A. Selected Financial Data” and our consolidated financial statements and related notes included elsewhere in this annual report. Unless otherwise indicated, we present our information on a consolidated basis.
OVERVIEW
Operating Environment
Our results of operations and financial condition are significantly affected by developments in Japan as well as the global economy.
The Japanese economy, as a whole, continued to recover gradually during the fiscal year ended March 31, 2025, supported by an increase in capital investments by businesses, although private consumption grew at a sluggish pace toward the end of the second half of the fiscal year.
Japanese gross domestic product (“GDP”) increased by 0.8% for the fiscal year ended March 31, 2025, compared with an increase of 0.6% in the previous fiscal year, based on data published in June 2025 by the Cabinet Office of the Government of Japan. The consumer price index for Japan (all items, less fresh food) (“CPI”) for the fiscal year ended March 31, 2025, increased by 2.7%, compared with an increase of 2.8% in the previous fiscal year, and the CPI in March 2025 increased by 3.2% compared to March 2024, based on data published in April 2025 by the Statistics Bureau of Japan.
The following table presents the quarter-on-quarter growth rates of Japanese GDP for the fiscal year ended March 31, 2024 and 2025.
| For the fiscal year ended March 31, | ||||||||||||||||||||||||||||||||
| 2024 | 2025 | |||||||||||||||||||||||||||||||
| 1Q | 2Q | 3Q | 4Q | 1Q | 2Q | 3Q | 4Q | |||||||||||||||||||||||||
| Japanese GDP |
0.6 | % | (1.0 | %) | (0.1 | %) | (0.3 | %) | 1.0 | % | 0.2 | % | 0.6 | % | (0.0 | %) | ||||||||||||||||
Japanese GDP increased by 1.0% and 0.2% on a quarter-on-quarter basis, for the first and second quarters, respectively, of the fiscal year ended March 31, 2025. This was primarily due to an increase in private consumption, supported by gradual improvements in the employment and income conditions. Japanese GDP increased by 0.6% on a quarter-on-quarter basis for the third quarter of the fiscal year ended March 31, 2025, primarily due to increases in capital investments by businesses and exports of goods and services resulting from an increase in foreign tourist spending. However, it slightly decreased on a quarter-on-quarter basis for the fourth quarter of the fiscal year ended March 31, 2025, primarily due to sluggish growth in private consumption influenced by persistent inflation and a decrease in net exports of goods and services.
The employment situation as a whole improved gradually. The active job openings-to-applicants ratio published by the Ministry of Health, Labour and Welfare of Japan remained almost unchanged for the fiscal year
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ended March 31, 2025. According to the statistical data published by the Statistics Bureau of Japan, the unemployment rate was 2.5% in March 2025, a decrease of 0.1 percentage points from the same month of the previous year. The compensation of employees increased by 1.8% for the fiscal year ended March 31, 2025.
Further, according to Teikoku Databank, a research institution in Japan, there were approximately 10,100 corporate bankruptcies in Japan for the fiscal year ended March 31, 2025, an increase of 13.4% from the previous fiscal year, involving approximately ¥2.3 trillion in total liabilities, a decrease of 7.5% from the previous fiscal year.
Interest rates in Japanese financial and capital markets are affected by the monetary policy measures of the Bank of Japan (“BOJ”). In January 2016, in addition to the existing provision of ample funds, the BOJ announced the introduction of “quantitative and qualitative monetary easing with a negative interest rate.” Thereafter, the BOJ announced the introduction of a new policy framework, “quantitative and qualitative monetary easing with yield curve control” in September 2016. Under this policy framework, the BOJ would keep short-term interest rates down by maintaining its policy of applying a negative interest rate of minus 0.1% to certain excess reserves of financial institutions held at the BOJ. Moreover, the BOJ indicated it would purchase Japanese government bonds so that the yield of the 10-year Japanese government bonds would be close to around 0% to control long-term interest rates. In December 2022, in light of increased observed volatility in overseas financial and capital markets that affected markets in Japan, the BOJ expanded the range of 10-year Japanese government bonds yield fluctuations to between plus and minus 0.5%. In October 2023, the BOJ announced adjustments to its yield curve control policy and would regard the upper bound of 1.0% for 10-year Japanese government bonds yields as a reference in its market operations. Thereafter, in March 2024, the BOJ announced its conclusion that the policy frameworks of “quantitative and qualitative monetary easing with yield curve control” and the negative interest rate policy to date have fulfilled their roles based on its outlook toward the price stability target. In addition, the BOJ stated that it would encourage the uncollateralized overnight call rate to remain at around 0% to 0.1%, continue its long-term Japanese government bonds purchases with broadly the same amount as before and make nimble responses by further purchases of long-term Japanese government bonds in case of a rapid rise in long-term interest rates. On June 14, 2024, the BOJ announced that it would reduce its purchase amount of long-term Japanese government bonds after the July 2024 Monetary Policy Meeting. This is to ensure that long-term interest rates would be formed more freely in financial markets. Subsequently, on July 31, 2024, the BOJ stated that it would encourage the uncollateralized overnight call rate to remain at around 0.25% and had decided on a plan to reduce its monthly purchase amount of long-term Japanese government bonds by about ¥400 billion each calendar quarter, in principle, from about ¥5.7 trillion in July 2024 to about ¥3 trillion in January-March 2026. On January 24, 2025, the BOJ stated that it would encourage the uncollateralized overnight call rate to remain at around 0.5%. On June 17, 2025, the BOJ stated that it had decided on a plan to reduce its monthly purchase amount of long-term Japanese government bonds by about ¥200 billion each calendar quarter, in principle, from April-June 2026, so that it would be about ¥2 trillion in January-March 2027. Under such circumstances, the uncollateralized overnight call rate, which is the benchmark for short-term interest rates, was around 0.5% at March 31, 2025. The yield on newly issued 10-year Japanese government bonds, which is the benchmark for long-term interest rates, was around 1.5% at March 31, 2025.
The yen appreciated against the U.S. dollar from ¥151.34 at March 29, 2024 to ¥149.14 at March 31, 2025, according to the statistical data published by the BOJ.
The Nikkei Stock Average, which is a price-weighted average of 225 stocks listed on the Tokyo Stock Exchange, rose from ¥40,369.44 at March 29, 2024, to an all-time high of ¥42,224.02 at July 11, 2024. It subsequently dropped to ¥35,617.56 at March 31, 2025.
According to a report published by the Ministry of Land, Infrastructure, Transport and Tourism of Japan, the average residential land price and the average commercial land price in Japan increased by 2.1% and 3.9%, respectively, in the calendar year 2024.
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During the fiscal year ended March 31, 2025, the global economy, as a whole, recovered gradually, although certain countries’ economies remained weak.
During the fiscal year ended March 31, 2025, the U.S. economy continued to recover, primarily due to an increase in private consumption supported by favorable employment and income conditions. However, it slowed down toward the end of the fiscal year, primarily due to an increase in imports of goods and services affected by a surge in demand ahead of the increase in tariffs. The European economy, as a whole, continued to recover gradually during the fiscal year ended March 31, 2025, primarily due to an increase in private consumption supported by easing inflation. However, economic outcomes varied across countries. In Asia, the Chinese economy slowed down during the fiscal year ended March 31, 2025, primarily due to sluggish momentum in the real estate market and a decrease in private consumption resulting from the sluggish employment situation, although exports of goods and services increased. Asian economies other than China, continued to recover gradually during the fiscal year ended March 31, 2025, primarily due to an increase in exports of IT-related goods.
In addition to economic factors and conditions, we expect that our results of operations and financial condition will be significantly affected by regulatory trends such as Japanese TLAC Standards, the Basel III reforms and the Dodd-Frank Act. For further information on regulations to which we are subject, risks associated with regulatory development and our management policy under this environment, see “Item 3.D. Risk Factors—Risks Related to Our Business,” “Item 4.B. Business Overview—Regulations in Japan, Regulations in the United States, Regulations in Other Jurisdictions and Description of Operations and Principal Activities—Management Policies.”
Factors Affecting Results of Operation
Income (Loss)
The major sources of our operating income are net interest income and net fee and commission income, alongside net income from trading, net income from financial assets and liabilities at fair value through profit or loss and net income from investment securities.
Net Interest Income. Net interest income, or the difference between interest income and interest expense, is determined by:
| • | the amount of interest-earning assets and interest-bearing liabilities; |
| • | the interest spread; |
| • | the general level of interest rates; and |
| • | the proportion of interest-earning assets to interest-bearing liabilities. |
Our principal interest-earning assets are loans and advances, investment securities, and deposits with banks. Our principal interest-bearing liabilities are deposits, borrowings and debt securities in issue. The interest income and expense on trading assets and liabilities, and financial assets and liabilities at fair value through profit or loss are not included in net interest income. Our net interest income is earned mainly by SMBC. SMBC controls its exposure to interest rate fluctuations through asset and liability management operations.
SMBC, like other banks in Japan, makes most domestic loans based on a short-term interest rate, the TIBOR, or a short-term prime rate, which are generally intended to reflect the cost of short-term yen funding and significantly affected by the monetary policy of the BOJ. For further information, see “Overview—Operating Environment.”
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The following table sets forth SMBC’s short-term prime rate, three-month TIBOR, ordinary deposit rate, long-term prime rate and ten-year swap rate, at the dates indicated:
| At March 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Short-term prime rate |
1.875 | % | 1.475 | % | 1.475 | % | ||||||
| Three-month TIBOR |
0.821 | 0.261 | 0.075 | |||||||||
| Ordinary deposit rate |
0.200 | 0.001 | 0.001 | |||||||||
| Long-term prime rate |
2.350 | 1.600 | 1.450 | |||||||||
| Ten-year swap rate |
1.374 | 0.903 | 0.713 | |||||||||
It is difficult to earn a wide interest spread when interest rates are at a low level, as they currently are in Japan. When interest rates rise from extremely low levels, interest spreads at commercial banks generally increase. However, interest spreads may temporarily decrease immediately after an increase in interest rates because it may take time for banks to increase lending rates correspondingly, in contrast to their funding rates. After an adjustment period, lending rates generally also increase, and banks are able to secure a wider interest spread than in a low interest rate environment. Conversely, interest spreads may temporarily increase immediately after a decrease in interest rates because it may take time for banks to decrease lending rates correspondingly, in contrast to their funding rates. After an adjustment period, lending rates generally also decrease, and banks generally are not able to maintain a wide interest spread.
Net Fee and Commission Income. We earn fees and commissions from a variety of services. The primary components of SMBC’s net fee and commission income are fees and commissions related to money remittances and transfers, investment trusts sales, loans (such as loan commitment fees and loan syndication fees for arranging loans), securities transactions (such as bond trustee fees and bond recording agency fees), and guarantees and acceptances. Other fees and commissions include fees from investment banking and electronic banking.
In addition, we earn a significant amount of fees on transactions in our credit card businesses, conducted through Sumitomo Mitsui Card, and fees and commissions on transactions in our securities businesses, conducted through SMBC Nikko Securities. The principal components of Sumitomo Mitsui Card’s fees are membership fees from retailers and annual cardholders, while those of SMBC Nikko Securities’ fees and commissions are subscription and agent commissions from investment trusts sales and underwriting fees.
The principal factors affecting fees and commissions are the demand for the services provided, the fees charged for those services and fees charged by competitors for similar services. The volume of services provided also affects profitability, as our fee businesses have significant economies of scale. In order to diversify sources of revenue and enhance return on assets, we are expanding our fees and commissions businesses, including sales of investment trusts and life insurance products, and investment banking businesses.
Net Income from Trading, Net Income from Financial Assets and Liabilities at Fair Value Through Profit or Loss and Net Income from Investment Securities. We undertake significant trading activities involving a variety of financial instruments, including derivatives. Our income from these activities is subject to volatility caused by, among other things, changes in interest rates, foreign exchange rates, equity prices or other market variables. Any unexpected change in interest rates could affect the fair value of our interest rate derivative positions and our net income from trading activities. Net trading income consists of margins made on market-making and our customer business as well as changes in fair value of trading assets and liabilities and derivative financial instruments. It also includes net interest and dividend income on these instruments.
We have a variety of financial assets and liabilities at fair value through profit or loss including investment trusts and hybrid instruments. Net income from financial assets and liabilities at fair value through profit or loss includes gains and losses arising from sales, redemptions and changes in the fair value of these financial
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instruments, and net interest and dividend income on these instruments. The fair values of those instruments such as investment trusts and hybrid instruments are subject to volatility caused by changes in equity prices and interest rates.
We have substantial investments in debt instruments measured at fair value through other comprehensive income. In particular, Japanese government bonds represent a significant part of our bond portfolio. We also own debt securities denominated in foreign currencies, principally the U.S. dollars. We also have investments in equity instruments measured at fair value through other comprehensive income, which consist primarily of our equity holding investments in stocks issued by our customers. Net investment income includes the gains and losses arising from the sales or redemptions of debt instruments measured at fair value through other comprehensive income and the dividend income earned from equity instruments measured at fair value through other comprehensive income. Increases in interest rates or declines in equity prices could substantially decrease the fair value of those instruments.
Expenses
Impairment Charges on Financial Assets. We use the expected credit losses (“ECL”) model for the recognition of impairment loss under IFRS 9 “Financial Instruments.” The ECL model requires that impairment losses be measured by using reasonable and supportable information including forecasts of future economic conditions and in an unbiased and probability-weighted manner. Our impairment charges are recorded primarily due to impairment on loans and advances.
Impairment charges on loans and advances are affected by the economic environment and financial conditions of borrowers. During periods of economic slowdown, corporate and individual borrowers are generally more likely to suffer credit rating downgrades, or become delinquent or default on their borrowings. The slowdown in the domestic or global economy may increase credit costs relating to a wide range of industries.
General and Administrative Expenses. General and administrative expenses consist primarily of personnel expenses (salaries and related expenses), depreciation and amortization expenses, and other expenses (outsourcing expenses, publicity and advertising expenses, and communication expenses).
Unrealized Gains or Losses on Investment Securities Portfolio
Changes in the fair value of domestic and foreign investment securities result in an increase or a decrease in unrealized gains or losses on investment securities measured at fair value through other comprehensive income. Unrealized gains or losses arising from changes in the fair value of the debt instruments in these securities are recognized directly in equity, until they are derecognized or impaired. Unrealized gains or losses arising from changes in the fair value of the equity instruments in these securities are recognized directly in equity, and amounts presented in equity are not subsequently transferred to profit or loss.
Most of our domestic equity instruments consist of publicly traded Japanese stocks. The Nikkei Stock Average increased by 44.0% from ¥28,041.48 at March 31, 2023, to ¥40,369.44 at March 29, 2024, and decreased by 11.8% to ¥35,617.56 at March 31, 2025. At March 31, 2025, we had net unrealized gains on domestic equity securities of ¥2,335,356 million, a decrease of ¥862,500 million from ¥3,197,856 million at March 31, 2024. For further information, see “Item 5.A. Operating Results—Financial Condition—Investment Securities.”
Equity Capital
In response to the imposition of more stringent regulatory capital requirements, we have been taking a proactive approach to managing our risk-weighted capital ratio by focusing on managing qualifying capital, including by building up our retained earnings, identifying risks, and controlling risk-weighted assets.
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Foreign Currency Fluctuations
The average exchange rate used to convert dollars to yen in the consolidated financial statements included elsewhere in this annual report for the fiscal year ended March 31, 2025 was ¥152.62 per $1.00, compared to the previous fiscal year’s average exchange rate of ¥144.59 per $1.00. The percentage of revenue we earned from our foreign operations for the fiscal years ended March 31, 2025 and 2024 was 71% and 64%, respectively. For further information, see “Item 4.B. Business Overview—Revenues by Region.”
New and Amended Accounting Standards and Recent Accounting Pronouncements
See “New and Amended Accounting Standards Adopted by the Group” and “Recent Accounting Pronouncements” under Note 2 “Summary of Material Accounting Policies” to our consolidated financial statements included elsewhere in this annual report.
5.A. OPERATING RESULTS
For discussion about our operating results for the fiscal year ended March 31, 2023, including certain comparative discussion of the fiscal years ended March 31, 2024 and 2023, please refer to “Item 5. Operating and Financial Review and Prospectus—5.A. Operating Results” in our annual report on Form 20-F filed on June 27, 2024.
Under the economic and financial circumstances described in “Item 5. Operating and Financial Review and Prospects—Overview—Operating Environment,” we made a profit through our commercial banking and other financial services businesses. Our total operating income decreased by ¥103,069 million from ¥3,943,234 million for the fiscal year ended March 31, 2024 to ¥3,840,165 million for the fiscal year ended March 31, 2025, primarily due to decreases in net trading income (loss) and net income from financial assets and liabilities at fair value through profit or loss, which were partially offset by an increase in net interest income. Our net profit decreased by ¥379,306 million from ¥895,750 million for the fiscal year ended March 31, 2024 to ¥516,444 million for the fiscal year ended March 31, 2025, due to the decrease in total operating income described above and increases in impairment charges on financial assets and operating expenses, which were partially offset by a decrease in income tax expense.
Our total assets increased by ¥10,893,433 million from ¥281,271,637 million at March 31, 2024 to ¥292,165,070 million at March 31, 2025, primarily due to increases in reverse repurchase agreements and cash collateral on securities borrowed, investment securities and loans and advances.
Our total liabilities increased by ¥10,683,937 million from ¥264,992,539 million at March 31, 2024 to ¥275,676,476 million at March 31, 2025, primarily due to increases in deposits and repurchase agreements and cash collateral on securities lent.
Our total equity increased by ¥209,496 million from ¥16,279,098 million at March 31, 2024 to ¥16,488,594 million at March 31, 2025, primarily due to an increase in equity attributable to other equity instruments holders.
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Operating Results
The following table presents information as to our income, expenses and net profit for the fiscal years ended March 31, 2025 and 2024.
| For the fiscal year ended March 31, |
||||||||
| 2025 | 2024 | |||||||
| (In millions, except per share data) |
||||||||
| Interest income |
¥ | 6,716,741 | ¥ | 5,944,398 | ||||
| Interest expense |
4,202,307 | 4,053,635 | ||||||
|
|
|
|
|
|||||
| Net interest income |
2,514,434 | 1,890,763 | ||||||
|
|
|
|
|
|||||
| Fee and commission income |
1,631,319 | 1,469,847 | ||||||
| Fee and commission expense |
314,931 | 233,715 | ||||||
|
|
|
|
|
|||||
| Net fee and commission income |
1,316,388 | 1,236,132 | ||||||
|
|
|
|
|
|||||
| Net trading income (loss) |
(186,688 | ) | 349,520 | |||||
| Net income from financial assets and liabilities at fair value through profit or loss |
43,524 | 323,217 | ||||||
| Net investment income |
78,969 | 29,844 | ||||||
| Net gains (losses) arising from derecognition of financial assets at amortized cost(1) |
(32,179 | ) | 1,550 | |||||
| Other income(1) |
105,717 | 112,208 | ||||||
|
|
|
|
|
|||||
| Total operating income(1) |
3,840,165 | 3,943,234 | ||||||
|
|
|
|
|
|||||
| Impairment charges on financial assets |
411,278 | 205,096 | ||||||
|
|
|
|
|
|||||
| Net operating income(1) |
3,428,887 | 3,738,138 | ||||||
|
|
|
|
|
|||||
| General and administrative expenses |
2,421,732 | 2,229,701 | ||||||
| Other expenses(1) |
495,587 | 461,018 | ||||||
|
|
|
|
|
|||||
| Operating expenses(1) |
2,917,319 | 2,690,719 | ||||||
|
|
|
|
|
|||||
| Share of post-tax profit of associates and joint ventures |
142,678 | 160,370 | ||||||
|
|
|
|
|
|||||
| Profit before tax |
654,246 | 1,207,789 | ||||||
|
|
|
|
|
|||||
| Income tax expense |
137,802 | 312,039 | ||||||
|
|
|
|
|
|||||
| Net profit |
¥ | 516,444 | ¥ | 895,750 | ||||
|
|
|
|
|
|||||
| Profit attributable to: |
||||||||
| Shareholders of Sumitomo Mitsui Financial Group, Inc. |
¥ | 478,132 | ¥ | 873,346 | ||||
| Non-controlling interests |
6,676 | 8,641 | ||||||
| Other equity instruments holders |
31,636 | 13,763 | ||||||
| Earnings per share(2): |
||||||||
| Basic |
¥ | 122.40 | ¥ | 219.04 | ||||
| Diluted |
122.36 | 218.98 | ||||||
| (1) | For the fiscal year ended March 31, 2025, we presented “Net gains (losses) arising from derecognition of financial assets at amortized cost” as a separate line item in the consolidated income statements. This line item was not presented separately in prior years but was included within “Other income” and “Other expenses.” The comparative amounts have been restated to conform to the current presentation. |
| (2) | As resolved by the board of directors on May 15, 2024, we implemented a stock split of our common stock with an effective date of October 1, 2024, whereby each share of common stock owned by shareholders listed or recorded in the closing register of shareholders on the record date of September 30, 2024 was split into three shares. Basic and diluted earnings per share are calculated based on the assumption that the stock split had been implemented at the beginning of the fiscal year ended March 31, 2024. |
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Total operating income decreased by ¥103,069 million, or 3%, from ¥3,943,234 million for the fiscal year ended March 31, 2024 to ¥3,840,165 million for the fiscal year ended March 31, 2025, primarily due to decreases in net trading income (loss) of ¥536,208 million and net income from financial assets and liabilities at fair value through profit or loss of ¥279,693 million, which were partially offset by an increase in net interest income of ¥623,671 million. In addition, due to an increase in impairment charges on financial assets, net operating income also decreased by ¥309,251 million from ¥3,738,138 million for the fiscal year ended March 31, 2024 to ¥3,428,887 million for the fiscal year ended March 31, 2025.
Net profit decreased by ¥379,306 million from ¥895,750 million for the fiscal year ended March 31, 2024 to ¥516,444 million for the fiscal year ended March 31, 2025, as a result of the decrease in net operating income described above and an increase in general and administrative expenses, which were partially offset by a decrease in income tax expense.
Net Interest Income
The following tables show the average balances of our statement of financial position items, related interest income, interest expense, net interest income and average rates for the fiscal years ended March 31, 2025 and 2024.
| For the fiscal year ended March 31, | ||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| Average balance(3) |
Interest income |
Average rate |
Average balance(3) |
Interest income |
Average rate |
|||||||||||||||||||
| (In millions, except percentages) | ||||||||||||||||||||||||
| Interest-earning assets: |
||||||||||||||||||||||||
| Interest-earning deposits with banks: |
||||||||||||||||||||||||
| Domestic offices |
¥ | 61,132,777 | ¥ | 150,660 | 0.25 | % | ¥ | 27,449,165 | ¥ | 31,499 | 0.11 | % | ||||||||||||
| Foreign offices |
10,322,330 | 501,381 | 4.86 | % | 11,070,392 | 572,765 | 5.17 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
71,455,107 | 652,041 | 0.91 | % | 38,519,557 | 604,264 | 1.57 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Call loans and bills bought, reverse repurchase agreements and cash collateral on securities borrowed: |
||||||||||||||||||||||||
| Domestic offices |
11,815,659 | 128,943 | 1.09 | % | 11,379,074 | 79,841 | 0.70 | % | ||||||||||||||||
| Foreign offices |
11,631,865 | 442,859 | 3.81 | % | 8,536,516 | 328,524 | 3.85 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
23,447,524 | 571,802 | 2.44 | % | 19,915,590 | 408,365 | 2.05 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Investment securities(1): |
||||||||||||||||||||||||
| Domestic offices |
19,139,502 | 300,019 | 1.57 | % | 18,289,128 | 236,610 | 1.29 | % | ||||||||||||||||
| Foreign offices |
9,152,913 | 325,716 | 3.56 | % | 7,843,093 | 257,098 | 3.28 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
28,292,415 | 625,735 | 2.21 | % | 26,132,221 | 493,708 | 1.89 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Loans and advances(2): |
||||||||||||||||||||||||
| Domestic offices |
73,086,292 | 1,281,714 | 1.75 | % | 69,795,241 | 1,178,957 | 1.69 | % | ||||||||||||||||
| Foreign offices |
51,599,922 | 3,585,449 | 6.95 | % | 47,182,431 | 3,259,104 | 6.91 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
124,686,214 | 4,867,163 | 3.90 | % | 116,977,672 | 4,438,061 | 3.79 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total interest-earning assets: |
||||||||||||||||||||||||
| Domestic offices |
165,174,230 | 1,861,336 | 1.13 | % | 126,912,608 | 1,526,907 | 1.20 | % | ||||||||||||||||
| Foreign offices |
82,707,030 | 4,855,405 | 5.87 | % | 74,632,432 | 4,417,491 | 5.92 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
¥ | 247,881,260 | ¥ | 6,716,741 | 2.71 | % | ¥ | 201,545,040 | ¥ | 5,944,398 | 2.95 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
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Table of Contents
| For the fiscal year ended March 31, | ||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| Average balance(3) |
Interest expense |
Average rate |
Average balance(3) |
Interest expense |
Average rate |
|||||||||||||||||||
| (In millions, except percentages) | ||||||||||||||||||||||||
| Interest-bearing liabilities: |
||||||||||||||||||||||||
| Deposits: |
||||||||||||||||||||||||
| Domestic offices |
¥ | 108,149,837 | ¥ | 326,413 | 0.30 | % | ¥ | 103,168,004 | ¥ | 217,776 | 0.21 | % | ||||||||||||
| Foreign offices |
43,249,557 | 1,914,192 | 4.43 | % | 41,198,120 | 1,955,469 | 4.75 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
151,399,394 | 2,240,605 | 1.48 | % | 144,366,124 | 2,173,245 | 1.51 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Call money and bills sold, repurchase agreements and cash collateral on securities lent: |
||||||||||||||||||||||||
| Domestic offices |
15,175,662 | 400,440 | 2.64 | % | 12,475,833 | 360,268 | 2.89 | % | ||||||||||||||||
| Foreign offices |
10,225,014 | 520,983 | 5.10 | % | 8,390,852 | 448,131 | 5.34 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
25,400,676 | 921,423 | 3.63 | % | 20,866,685 | 808,399 | 3.87 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Borrowings and other interest- bearing liabilities: |
||||||||||||||||||||||||
| Domestic offices |
15,203,665 | 104,439 | 0.69 | % | 16,314,414 | 112,145 | 0.69 | % | ||||||||||||||||
| Foreign offices |
1,601,867 | 105,820 | 6.61 | % | 1,480,614 | 85,426 | 5.77 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
16,805,532 | 210,259 | 1.25 | % | 17,795,028 | 197,571 | 1.11 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Debt securities in issue: |
||||||||||||||||||||||||
| Domestic offices |
11,013,058 | 607,210 | 5.51 | % | 10,362,345 | 609,554 | 5.88 | % | ||||||||||||||||
| Foreign offices |
2,644,393 | 130,912 | 4.95 | % | 2,443,321 | 131,215 | 5.37 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
13,657,451 | 738,122 | 5.40 | % | 12,805,666 | 740,769 | 5.78 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Premiums for deposit insurance and others: |
||||||||||||||||||||||||
| Domestic offices |
— | 28,639 | — | — | 26,579 | — | ||||||||||||||||||
| Foreign offices |
— | 63,259 | — | — | 107,072 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
— | 91,898 | — | — | 133,651 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total interest-bearing liabilities: |
||||||||||||||||||||||||
| Domestic offices |
149,542,222 | 1,467,141 | 0.98 | % | 142,320,596 | 1,326,322 | 0.93 | % | ||||||||||||||||
| Foreign offices |
57,720,831 | 2,735,166 | 4.74 | % | 53,512,907 | 2,727,313 | 5.10 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
¥ | 207,263,053 | ¥ | 4,202,307 | 2.03 | % | ¥ | 195,833,503 | ¥ | 4,053,635 | 2.07 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net interest income and interest rate spread |
¥ | 2,514,434 | 0.68 | % | ¥ | 1,890,763 | 0.88 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (1) | Taxable investment securities and non-taxable investment securities are not disclosed separately because the aggregate effect of these average balances and interest income would not be material. In addition, the yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect of such calculation would not be material. |
| (2) | Loans and advances include impaired loans and advances. The amortized portion of net loan origination fees is included in interest income on loans and advances. |
| (3) | Average balances are generally based on a daily average. Weekly, month-end or quarter-end averages are used for certain average balances where it is not practical to obtain applicable daily averages. The allocations of amounts between domestic and foreign are based on the location of the office. |
74
Table of Contents
The following tables show changes in our interest income, interest expense and net interest income based on changes in volume and changes in rate for the fiscal year ended March 31, 2025 compared to the fiscal year ended March 31, 2024.
| Fiscal year ended March 31, 2025 compared to fiscal year ended March 31, 2024 Increase / (decrease) |
||||||||||||
| Volume | Rate | Net change | ||||||||||
| (In millions) | ||||||||||||
| Interest income: |
||||||||||||
| Interest-earning deposits with banks: |
||||||||||||
| Domestic offices |
¥ | 60,200 | ¥ | 58,961 | ¥ | 119,161 | ||||||
| Foreign offices |
(37,446 | ) | (33,938 | ) | (71,384 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Total |
22,754 | 25,023 | 47,777 | |||||||||
|
|
|
|
|
|
|
|||||||
| Call loans and bills bought, reverse repurchase agreements and cash collateral on securities borrowed: |
||||||||||||
| Domestic offices |
3,166 | 45,936 | 49,102 | |||||||||
| Foreign offices |
117,967 | (3,632 | ) | 114,335 | ||||||||
|
|
|
|
|
|
|
|||||||
| Total |
121,133 | 42,304 | 163,437 | |||||||||
|
|
|
|
|
|
|
|||||||
| Investment securities: |
||||||||||||
| Domestic offices |
11,390 | 52,019 | 63,409 | |||||||||
| Foreign offices |
45,389 | 23,229 | 68,618 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
56,779 | 75,248 | 132,027 | |||||||||
|
|
|
|
|
|
|
|||||||
| Loans and advances: |
||||||||||||
| Domestic offices |
56,745 | 46,012 | 102,757 | |||||||||
| Foreign offices |
306,913 | 19,432 | 326,345 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
363,658 | 65,444 | 429,102 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total interest income: |
||||||||||||
| Domestic offices |
131,501 | 202,928 | 334,429 | |||||||||
| Foreign offices |
432,823 | 5,091 | 437,914 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
¥ | 564,324 | ¥ | 208,019 | ¥ | 772,343 | ||||||
|
|
|
|
|
|
|
|||||||
75
Table of Contents
| Fiscal year ended March 31, 2025 compared to fiscal year ended March 31, 2024 Increase / (decrease) |
||||||||||||
| Volume | Rate | Net change | ||||||||||
| (In millions) | ||||||||||||
| Interest expense: |
||||||||||||
| Deposits: |
||||||||||||
| Domestic offices |
¥ | 10,916 | ¥ | 97,721 | ¥ | 108,637 | ||||||
| Foreign offices |
94,653 | (135,930 | ) | (41,277 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Total |
105,569 | (38,209 | ) | 67,360 | ||||||||
|
|
|
|
|
|
|
|||||||
| Call money and bills sold, repurchase agreements and cash collateral on securities lent: |
||||||||||||
| Domestic offices |
73,203 | (33,031 | ) | 40,172 | ||||||||
| Foreign offices |
94,293 | (21,441 | ) | 72,852 | ||||||||
|
|
|
|
|
|
|
|||||||
| Total |
167,496 | (54,472 | ) | 113,024 | ||||||||
|
|
|
|
|
|
|
|||||||
| Borrowings and other interest-bearing liabilities: |
||||||||||||
| Domestic offices |
(7,664 | ) | (42 | ) | (7,706 | ) | ||||||
| Foreign offices |
7,363 | 13,031 | 20,394 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
(301 | ) | 12,989 | 12,688 | ||||||||
|
|
|
|
|
|
|
|||||||
| Debt securities in issue: |
||||||||||||
| Domestic offices |
35,857 | (38,201 | ) | (2,344 | ) | |||||||
| Foreign offices |
12,384 | (12,687 | ) | (303 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Total |
48,241 | (50,888 | ) | (2,647 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Premiums for deposit insurance and others: |
||||||||||||
| Domestic offices |
2,060 | — | 2,060 | |||||||||
| Foreign offices |
(43,813 | ) | — | (43,813 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Total |
(41,753 | ) | — | (41,753 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Total interest expense: |
||||||||||||
| Domestic offices |
114,372 | 26,447 | 140,819 | |||||||||
| Foreign offices |
164,880 | (157,027 | ) | 7,853 | ||||||||
|
|
|
|
|
|
|
|||||||
| Total |
¥ | 279,252 | ¥ | (130,580 | ) | ¥ | 148,672 | |||||
|
|
|
|
|
|
|
|||||||
| Net interest income: |
||||||||||||
| Domestic offices |
¥ | 17,129 | ¥ | 176,481 | ¥ | 193,610 | ||||||
| Foreign offices |
267,943 | 162,118 | 430,061 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
¥ | 285,072 | ¥ | 338,599 | ¥ | 623,671 | ||||||
|
|
|
|
|
|
|
|||||||
Interest Income
Our interest income increased by ¥772,343 million, or 13% from ¥5,944,398 million for the fiscal year ended March 31, 2024 to ¥6,716,741 million for the fiscal year ended March 31, 2025. Interest income on loans and advances increased by ¥102,757 million at domestic offices and by ¥326,345 million at foreign offices. The increase at domestic offices was primarily due to an increase in the average balance of loans, as we captured the steady demand for financing needs amid robust business activities, as well as an increase in the average rate of loans, reflecting an increase in loans with higher interest rates such as LBO and MBO financing which was partially offset by repayments of loans such as consumer housing loans with higher interest rates which had been extended in the past. The increase at foreign offices was primarily due to an increase in the average balance of loans as a result of our efforts to meet corporate customers’ financing needs.
76
Table of Contents
Interest Expense
Our interest expense increased by ¥148,672 million, or 4%, from ¥4,053,635 million for the fiscal year ended March 31, 2024 to ¥4,202,307 million for the fiscal year ended March 31, 2025, primarily due to an increase in interest expenses on call money and bills sold, and repurchase agreements and cash collateral on securities lent and an increase in interest expenses on deposits. Our interest expense on call money and bills sold, and repurchase agreements and cash collateral on securities lent increased by ¥113,024 million, primarily due to increases in volume at both foreign and domestic offices, and our interest expense on deposits increased by ¥67,360 million, primarily due to an increase in interest rate at domestic offices.
Net Interest Income
Our net interest income increased by ¥623,671 million, or 33%, from ¥1,890,763 million for the fiscal year ended March 31, 2024, to ¥2,514,434 million for the fiscal year ended March 31, 2025. This was primarily due to an increase of loans and advances at foreign offices and domestic offices, which was partially offset by an increase in the average rate on deposits at domestic offices.
From the fiscal year ended March 31, 2024 to March 31, 2025, the average rate on loans and advances at domestic offices increased by 0.06 percentage points from 1.69% to 1.75%. The average rate on loans and advances at foreign offices increased by 0.04 percentage points from 6.91% to 6.95%, resulting in the total for loans and advances increasing by 0.11 percentage points from 3.79% to 3.90%. On the other hand, the average rate on deposits at domestic offices increased by 0.09 percentage points from 0.21% to 0.30%.
Net Fee and Commission Income
The following table sets forth our net fee and commission income for the periods shown.
| For the fiscal year ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| (In millions) | ||||||||
| Fee and commission income from: |
||||||||
| Loans |
¥ | 212,346 | ¥ | 160,758 | ||||
| Credit card business |
483,815 | 432,983 | ||||||
| Guarantees |
83,104 | 82,323 | ||||||
| Securities-related business |
245,651 | 196,019 | ||||||
| Deposits |
18,971 | 18,437 | ||||||
| Remittances and transfers |
159,024 | 152,121 | ||||||
| Safe deposits |
4,025 | 4,321 | ||||||
| Trust fees |
9,734 | 8,195 | ||||||
| Investment trusts |
191,689 | 166,532 | ||||||
| Agency |
8,636 | 9,538 | ||||||
| Others |
214,324 | 238,620 | ||||||
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| Total fee and commission income |
1,631,319 | 1,469,847 | ||||||
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| Fee and commission expense from: |
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| Remittances and transfers |
31,672 | 30,197 | ||||||
| Others |
283,259 | 203,518 | ||||||
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| Total fee and commission expense |
314,931 | 233,715 | ||||||
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| Net fee and commission income |
¥ | 1,316,388 | ¥ | 1,236,132 | ||||
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Fee and commission income increased by ¥161,472 million, or 11%, from ¥1,469,847 million for the fiscal year ended March 31, 2024 to ¥1,631,319 million for the fiscal year ended March 31, 2025. Primary sources of
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fee and commission income are fees obtained through our credit card business, fees and commissions obtained through our securities-related business, fees and commissions obtained through investment trusts, loan transaction fees, and remittance and transfer fees. The increase in fee and commission income was primarily due to increases in fees from overseas loan transactions and domestic syndicates, and an increase in income from the credit card business reflecting an increase in cashless payments. Fee and commission income from securities-related business and investment trusts also increased due to an increase in underwriting fees resulting from capturing active corporate actions and steady performance of the asset management business reflecting favorable market conditions.
Fee and commission expense was ¥314,931 million for the fiscal year ended March 31, 2025, increased by ¥81,216 million from ¥233,715 million for the fiscal year ended March 31, 2024.
As a result, net fee and commission income increased by ¥80,256 million from ¥1,236,132 million for the fiscal year ended March 31, 2024 to ¥1,316,388 million for the fiscal year ended March 31, 2025.
Net Income (Loss) from Trading, Net Income from Financial Assets and Liabilities at Fair Value Through Profit or Loss, Net Income from Investment Securities and Net Gains (Losses) Arising from Derecognition of Financial Assets at Amortized Cost
The following table sets forth our net income (loss) from trading, net income from financial assets and liabilities at fair value through profit or loss, net income from investment securities and net gains (losses) arising from derecognition of financial assets at amortized cost for the periods shown.
| For the fiscal year ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| (In millions) | ||||||||
| Net trading income (loss): |
||||||||
| Interest rate |
¥ | (35,575 | ) | ¥ | 179,954 | |||
| Foreign exchange |
(188,913 | ) | 148,064 | |||||
| Equity |
38,780 | 26,626 | ||||||
| Credit |
(2,237 | ) | (4,668 | ) | ||||
| Others |
1,257 | (456 | ) | |||||
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| Total net trading income (loss) |
¥ | (186,688 | ) | ¥ | 349,520 | |||
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| Net income from financial assets and liabilities at fair value through profit or loss: |
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| Net income from financial assets mandatorily at fair value through profit or loss: |
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| Net income from debt instruments |
¥ | 37,829 | ¥ | 328,657 | ||||
| Net income (loss) from equity instruments |
(2,573 | ) | 6,062 | |||||
| Net income (loss) from financial liabilities designated at fair value through profit or loss |
8,268 | (11,502 | ) | |||||
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| Total net income from financial assets and liabilities at fair value through profit or loss |
¥ | 43,524 | ¥ | 323,217 | ||||
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| Net investment income: |
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| Net loss from disposal of debt instruments |
¥ | (45,357 | ) | ¥ | (85,823 | ) | ||
| Dividend income |
124,326 | 115,667 | ||||||
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| Total net investment income |
¥ | 78,969 | ¥ | 29,844 | ||||
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| Net gains (losses) arising from derecognition of financial assets at amortized cost |
¥ | (32,179 | ) | ¥ | 1,550 | |||
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Net trading income (loss), which includes income and losses from trading assets and liabilities and derivative financial instruments, decreased by ¥536,208 million from net income of ¥349,520 million for the fiscal year ended March 31, 2024 to a net loss of ¥186,688 million for the fiscal year ended March 31, 2025. The decrease was primarily due to a decrease in net trading income (loss) from interest rate related transactions and foreign exchange transactions.
We have carried out hedging transactions mainly to hedge the interest rate risk of financial assets and liabilities and the foreign exchange risk of foreign currency denominated assets and liabilities. Of those hedges, economic hedges are economically effective for risk management but are not accounted for as hedge accounting under IFRS.
As for the economic hedges against interest rate risk, hedged items include loans and deposits and hedging instruments are derivative financial instruments such as interest rate swaps. As for the economic hedges against foreign exchange risk, hedged items are foreign currency denominated assets and liabilities and hedging instruments are currency derivatives. Economic hedge transactions may lead to accounting mismatches (i.e., when the gains or losses on the hedged items and hedging instruments do not arise at the same time, or the hedged items and hedging instruments do not offset each other either in profit or loss, or in other comprehensive income), and may result in significant fluctuations in net trading income (loss).
Net income from financial assets and liabilities at fair value through profit or loss decreased by ¥279,693 million from a net income of ¥323,217 million for the fiscal year ended March 31, 2024 to a net income of ¥43,524 million for the fiscal year ended March 31, 2025. This was primarily due to a decrease in net gains from changes in the fair value of equity index-linked investment trusts.
Net investment income increased by ¥49,125 million from ¥29,844 million for the fiscal year ended March 31, 2024 to ¥78,969 million for the fiscal year ended March 31, 2025. This was primarily due to a decrease in net losses from sales of bonds.
Net gains (losses) arising from derecognition of financial assets at amortized cost decreased by ¥33,729 million from net gains of ¥1,550 million for the fiscal year ended March 31, 2024 to net losses of ¥32,179 million for the fiscal year ended March 31, 2025. The decrease was primarily due to the sales of certain low-profit loans in the Europe and Middle East region.
Impairment Charges on Financial Assets
The following table sets forth our impairment charges (reversals) on financial assets for the periods shown.
| For the fiscal year ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| (In millions) | ||||||||
| Loans and advances |
¥ | 378,791 | ¥ | 222,894 | ||||
| Loan commitments |
18,162 | (13,875 | ) | |||||
| Financial guarantees |
14,030 | (3,923 | ) | |||||
| Investment securities |
295 | — | ||||||
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| Total impairment charges on financial assets |
¥ | 411,278 | ¥ | 205,096 | ||||
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Our impairment charges on financial assets consist of losses relating to loans and advances, loan commitments and financial guarantee contracts. Impairment charges on these financial assets are mainly affected by the economic environment and financial conditions of borrowers.
Impairment charges on financial assets increased by ¥206,182 million from ¥205,096 million for the fiscal year ended March 31, 2024 to ¥411,278 million for the fiscal year ended March 31, 2025. The increase was
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primarily due to an increase in the provision for loan losses related to some large corporate borrowers and the additional adjustments to the ECL allowance for the portfolios affected by the high tariff measures by the United States on its trading partner countries. For further information on provision for loan losses, see “—Financial Condition—Allowance for Loan Losses.”
General and Administrative Expenses
The following table sets forth our general and administrative expenses for the periods shown.
| For the fiscal year ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| (In millions) | ||||||||
| Personnel expenses |
¥ | 1,128,120 | ¥ | 1,028,875 | ||||
| Depreciation and amortization |
292,363 | 276,534 | ||||||
| Building and maintenance expenses |
8,849 | 8,992 | ||||||
| Supplies expenses |
19,389 | 17,101 | ||||||
| Communication expenses |
32,853 | 31,650 | ||||||
| Publicity and advertising expenses |
203,347 | 172,807 | ||||||
| Taxes and dues |
115,639 | 100,428 | ||||||
| Outsourcing expenses |
124,878 | 144,994 | ||||||
| Office equipment expenses |
79,115 | 81,430 | ||||||
| Others |
417,179 | 366,890 | ||||||
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| Total general and administrative expenses |
¥ | 2,421,732 | ¥ | 2,229,701 | ||||
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General and administrative expenses increased by ¥192,031 million, or 9%, from ¥2,229,701 million for the fiscal year ended March 31, 2024 to ¥2,421,732 million for the fiscal year ended March 31, 2025. The increase was primarily due to inflation and increases in expenses related to business development, as well as higher variable marketing costs in the credit card businesses.
Share of Post-tax Profit of Associates and Joint Ventures
Share of post-tax profit of associates and joint ventures decreased by ¥17,692 million from ¥160,370 million for the fiscal year ended March 31, 2024 to ¥142,678 million for the fiscal year ended March 31, 2025, primarily due to an increase in the share of loss of our foreign associate engaged in the consumer finance business.
Income Tax Expense
Income tax expense decreased by ¥174,237 million from ¥312,039 million for the fiscal year ended March 31, 2024 to ¥137,802 million for the fiscal year ended March 31, 2025. The decrease was primarily due to an increase in deferred tax benefit related to investment securities and derivative financial instruments.
Business Segment Analysis
Our business segment information is prepared based on the internal reporting system utilized by our management to assess the performance of our business segments under Japanese GAAP.
We have four main business segments: the Wholesale Business Unit, the Retail Business Unit, the Global Business Unit and the Global Markets Business Unit, with the remaining operations recorded in Head office account and others.
Our organizational charts are provided in “Item 4.C. Organizational Structure.” Since figures reported to management are prepared under Japanese GAAP, the segment information does not agree to figures in the
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consolidated financial statements under IFRS. This difference is addressed in Note 4 “Segment Analysis—Reconciliation of Segmental Results of Operations to Consolidated Income Statements” to our consolidated financial statements included elsewhere in this annual report.
Segmental Results of Operations
The following tables show our results of operations by business segment for the fiscal years ended March 31, 2025 and 2024.
For the fiscal year ended March 31, 2025:
| Wholesale Business Unit |
Retail Business Unit |
Global Business Unit |
Global Markets Business Unit |
Head office account and others |
Total | |||||||||||||||||||
| (In billions) | ||||||||||||||||||||||||
| Consolidated gross profit(1) |
¥ | 931.3 | ¥ | 1,377.3 | ¥ | 1,344.9 | ¥ | 636.6 | ¥ | (163.4 | ) | ¥ | 4,126.7 | |||||||||||
| General and administrative expenses |
(328.1 | ) | (1,110.3 | ) | (903.3 | ) | (196.0 | ) | 135.7 | (2,402.0 | ) | |||||||||||||
| Others(2) |
126.0 | 6.8 | 150.4 | 33.9 | (322.5 | ) | (5.4 | ) | ||||||||||||||||
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| Consolidated net business profit |
¥ | 729.2 | ¥ | 273.8 | ¥ | 592.0 | ¥ | 474.5 | ¥ | (350.2 | ) | ¥ | 1,719.3 | |||||||||||
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For the fiscal year ended March 31, 2024:
| Wholesale Business Unit |
Retail Business Unit |
Global Business Unit |
Global Markets Business Unit |
Head office account and others |
Total | |||||||||||||||||||
| (In billions) | ||||||||||||||||||||||||
| Consolidated gross profit(1) |
¥ | 835.2 | ¥ | 1,290.0 | ¥ | 1,375.9 | ¥ | 526.2 | ¥ | (288.5 | ) | ¥ | 3,738.8 | |||||||||||
| General and administrative expenses |
(311.0 | ) | (1,079.9 | ) | (809.3 | ) | (165.3 | ) | 114.9 | (2,250.6 | ) | |||||||||||||
| Others(2) |
107.9 | 5.6 | 78.3 | 29.0 | (148.8 | ) | 72.0 | |||||||||||||||||
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| Consolidated net business profit |
¥ | 632.1 | ¥ | 215.7 | ¥ | 644.9 | ¥ | 389.9 | ¥ | (322.4 | ) | ¥ | 1,560.2 | |||||||||||
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| (1) | Consolidated gross profit = (Interest income – Interest expenses) + Trust fees + (Fee and commission income – Fee and commission expenses) + (Trading income – Trading losses) + (Other operating income – Other operating expenses). |
| (2) | “Others” includes share of profit or loss of equity-method associates and joint ventures and cooperated profit and loss, that is, profit and loss double counted within our business segments in the managerial accounting. |
The following are explanations of our results of operations by business segment for the fiscal year ended March 31, 2025. It also includes the changes from the previous year, which are adjusted by eliminating the impact of factors such as changes in interest rates and exchange rates that may distort the comparison.
Wholesale Business Unit
Consolidated gross profit for the fiscal year ended March 31, 2025 was ¥931.3 billion and increased by ¥105.4 billion on an adjusted basis compared to the fiscal year ended March 31, 2024. This was primarily due to increases in interest income on loans of SMBC and fees and commission income related to the securities business.
General and administrative expenses for the fiscal year ended March 31, 2025 was ¥328.1 billion and increased by ¥21.5 billion on an adjusted basis compared to the fiscal year ended March 31, 2024.
Others for the fiscal year ended March 31, 2025 was ¥126.0 billion.
As a result, consolidated net business profit for the fiscal year ended March 31, 2025 was ¥729.2 billion and increased by ¥95.0 billion on an adjusted basis compared to the fiscal year ended March 31, 2024.
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Retail Business Unit
Consolidated gross profit for the fiscal year ended March 31, 2025 was ¥1,377.3 billion and increased by ¥118.9 billion on an adjusted basis compared to the fiscal year ended March 31, 2024. This was primarily due to increases in interest income on loans and deposits and income from the wealth management and payment businesses.
General and administrative expenses for the fiscal year ended March 31, 2025 was ¥1,110.3 billion and increased by ¥67.5 billion on an adjusted basis compared to the fiscal year ended March 31, 2024. This was primarily due to an increase in the variable marketing costs of the payment business.
Others for the fiscal year ended March 31, 2025 was ¥6.8 billion.
As a result, consolidated net business profit for the fiscal year ended March 31, 2025 was ¥273.8 billion and increased by ¥52.6 billion on an adjusted basis compared to the fiscal year ended March 31, 2024.
Global Business Unit
Consolidated gross profit for the fiscal year ended March 31, 2025 was ¥1,344.9 billion and increased by ¥44.4 billion on an adjusted basis compared to the fiscal year ended March 31, 2024. This was primarily due to an increase in interest income on loans.
General and administrative expenses for the fiscal year ended March 31, 2025 was ¥903.3 billion and increased by ¥105.9 billion on an adjusted basis compared to the fiscal year ended March 31, 2024. This was primarily due to increases in expenses related to overseas business development and enhancement of the governance system.
Others for the fiscal year ended March 31, 2025 was ¥150.4 billion.
As a result, consolidated net business profit for the fiscal year ended March 31, 2025 was ¥592.0 billion and decreased by ¥29.9 billion on an adjusted basis compared to the fiscal year ended March 31, 2024.
Global Markets Business Unit
Consolidated gross profit for the fiscal year ended March 31, 2025 was ¥636.6 billion and increased by ¥90.6 billion on an adjusted basis compared to the fiscal year ended March 31, 2024. This was primarily due to nimble portfolio management in the volatile market environment and an increase in the sales and trading profits.
General and administrative expenses for the fiscal year ended March 31, 2025 was ¥196.0 billion and increased by ¥20.4 billion on an adjusted basis compared to the fiscal year ended March 31, 2024.
Others for the fiscal year ended March 31, 2025 was ¥33.9 billion.
As a result, consolidated net business profit for the fiscal year ended March 31, 2025 was ¥474.5 billion and increased by ¥72.0 billion on an adjusted basis compared to the fiscal year ended March 31, 2024.
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Financial Condition
Assets
Our total assets increased by ¥10,893,433 million from ¥281,271,637 million at March 31, 2024 to ¥292,165,070 million at March 31, 2025. The increase was primarily due to increases in reverse repurchase agreements and cash collateral on securities borrowed, investment securities and loans and advances.
Our assets at March 31, 2025 and 2024 were as follows.
| At March 31, | ||||||||
| 2025 | 2024 | |||||||
| (In millions) | ||||||||
| Cash and deposits with banks |
¥ | 76,669,401 | ¥ | 78,750,443 | ||||
| Call loans and bills bought |
5,200,789 | 5,336,280 | ||||||
| Reverse repurchase agreements and cash collateral on securities borrowed |
22,076,009 | 14,148,667 | ||||||
| Trading assets |
6,176,613 | 6,512,061 | ||||||
| Derivative financial instruments |
8,313,016 | 9,909,272 | ||||||
| Financial assets at fair value through profit or loss |
2,902,969 | 2,376,129 | ||||||
| Investment securities |
33,546,133 | 30,149,837 | ||||||
| Loans and advances |
125,190,819 | 121,716,465 | ||||||
| Investments in associates and joint ventures |
1,588,820 | 1,552,645 | ||||||
| Property, plant and equipment |
1,319,002 | 1,347,093 | ||||||
| Intangible assets |
1,091,194 | 1,025,548 | ||||||
| Other assets |
7,983,972 | 8,327,942 | ||||||
| Current tax assets |
43,157 | 61,175 | ||||||
| Deferred tax assets |
63,176 | 58,080 | ||||||
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| Total assets |
¥ | 292,165,070 | ¥ | 281,271,637 | ||||
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Loans and Advances
Our main operating activity is the lending business. We make loans and extend other types of credit principally to corporate and individual customers in Japan and to corporate customers in foreign countries.
At March 31, 2025, our loans and advances were ¥125,190,819 million, or 43% of total assets, representing an increase of ¥3,474,354 million, or 3%, from ¥121,716,465 million at March 31, 2024. Our loans and advances at domestic offices increased as we captured the steady demand for financing amid robust business activities. Our loans and advances at foreign offices increased primarily due to our efforts to meet corporate customers’ financing needs reflecting the decrease in the market interest rate.
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Domestic
Through SMBC and other banking and non-bank subsidiaries, we make loans to a broad range of industrial, commercial and individual customers in Japan. The following table shows our outstanding loans and advances to customers whose domiciles are in Japan, classified by industry, before deducting the allowance for loan losses, and adjusting unearned income, unamortized premiums-net and deferred loan fees-net at the dates indicated.
| At March 31, | ||||||||
| 2025 | 2024 | |||||||
| (In millions) | ||||||||
| Manufacturing |
¥ | 12,299,303 | ¥ | 11,280,268 | ||||
| Agriculture, forestry, fisheries and mining |
254,820 | 243,528 | ||||||
| Construction |
1,118,001 | 1,107,013 | ||||||
| Transportation, communications and public enterprises |
6,795,140 | 6,320,575 | ||||||
| Wholesale and retail |
6,413,857 | 6,222,405 | ||||||
| Finance and insurance |
3,962,719 | 3,877,554 | ||||||
| Real estate and goods rental and leasing |
18,144,037 | 16,921,046 | ||||||
| Services |
5,277,710 | 5,449,640 | ||||||
| Municipalities |
583,750 | 573,667 | ||||||
| Lease financing |
21,154 | 48,492 | ||||||
| Consumer(1) |
16,806,507 | 16,426,993 | ||||||
| Others(2) |
1,563,164 | 2,691,225 | ||||||
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| Total domestic |
¥ | 73,240,162 | ¥ | 71,162,406 | ||||
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| (1) | The balance in Consumer mainly consists of housing loans. The housing loan balances amounted to ¥11,120,139 million and ¥11,008,530 million at March 31, 2025 and 2024, respectively. |
| (2) | The balance in Others includes loans and advances to the Government of Japan. |
Foreign
The following table shows the outstanding loans and advances to our customers whose domiciles are not in Japan, classified by industry, before deducting the allowance for loan losses, and adjusting unearned income, unamortized premiums-net and deferred loan fees-net at the dates indicated.
| At March 31, | ||||||||
| 2025 | 2024 | |||||||
| (In millions) | ||||||||
| Public sector |
¥ | 664,085 | ¥ | 598,598 | ||||
| Financial institutions |
12,415,685 | 10,874,863 | ||||||
| Commerce and industry |
32,682,288 | 33,669,222 | ||||||
| Lease financing |
300,322 | 276,063 | ||||||
| Others |
7,521,732 | 6,604,968 | ||||||
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| Total foreign |
¥ | 53,584,112 | ¥ | 52,023,714 | ||||
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Allowance for Loan Losses
We calculate the allowance for loan losses using the latest assignment of obligor grades (our internal credit rating) and supplementary data such as the borrowers’ operating cash flows, realizable value of collateral and recent economic conditions.
In respect of additional ECL adjustments, we decided to make ECL adjustments for the portfolios affected by high tariff measures by the United States on its trading partner countries, the situation in Russia and Ukraine,
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the continuing high interest rates in foreign countries and the changes in the domestic business environment. At March 31, 2025, the additional adjustments to the ECL allowance for the portfolios affected by high tariff measures by the United States on its trading partner countries was ¥40,550 million. Further, our credit risk exposure to Russian borrowers was approximately ¥237 billion and the ECL for that exposure was ¥101,524 million. In addition, the additional adjustments to the ECL allowance for the portfolios affected by the continuing high interest rates in foreign countries and for the portfolios affected by the changes in the domestic business environment were ¥16,398 million and ¥13,868 million, respectively.
For the fiscal year ended March 31, 2025, the allowance for loan losses increased by ¥123,522 million, or 12.6%, from ¥979,000 million at beginning of the period to ¥1,102,522 million at end of period. The balance of the allowance for loan losses increases when a provision for loan losses is recognized and decreases when charge-offs are recognized through the sales of loans and write-offs. As we recorded a provision for loan losses of ¥378,791 million and charge-offs of ¥264,684 million for the fiscal year ended March 31, 2025, the provision for loan losses exceeded charge-offs and the overall allowance for loan losses increased.
The provision for loan losses increased by ¥155,897 million to ¥378,791 million for the fiscal year ended March 31, 2025 as compared to ¥222,894 million for the fiscal year ended March 31, 2024. The increase was primarily due to an increase in the provision for loan losses related to some large corporate borrowers and the additional adjustments to the ECL allowance for the portfolios affected by the high tariff measures by the United States on its trading partner countries. Charge-offs increased by ¥80,076 million from the previous fiscal year to ¥264,684 million for the fiscal year ended March 31, 2025. Charge-offs of domestic loans and advances decreased by ¥5,995 million compared to the previous fiscal year to ¥122,077 million for the fiscal year ended March 31, 2025. Charge-offs of foreign loans and advances increased by ¥86,071 million compared to the previous fiscal year to ¥142,607 million for the fiscal year ended March 31, 2025.
The following tables show our allowance for loan losses for each of the periods indicated.
| At March 31, 2025 | ||||||||||||||||
| 12-month ECL |
Lifetime ECL not credit- impaired |
Lifetime ECL credit- impaired |
Total | |||||||||||||
| (In millions) | ||||||||||||||||
| Allowance for loan losses: |
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| Balance at April 1, 2024 |
¥ | 196,325 | ¥ | 257,542 | ¥ | 525,133 | ¥ | 979,000 | ||||||||
| Net transfers between stages |
(11,743 | ) | (20,651 | ) | 32,394 | — | ||||||||||
| Provision for loan losses |
109,536 | 17,264 | 251,991 | 378,791 | ||||||||||||
| Charge-offs(1) |
— | — | 264,684 | 264,684 | ||||||||||||
| Recoveries |
— | — | 18,553 | 18,553 | ||||||||||||
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| Net charge-offs |
— | — | 246,131 | 246,131 | ||||||||||||
| Others(2) |
1,234 | (2,475 | ) | (7,897 | ) | (9,138 | ) | |||||||||
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|||||||||
| Balance at March 31, 2025 |
¥ | 295,352 | ¥ | 251,680 | ¥ | 555,490 | ¥ | 1,102,522 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
85
Table of Contents
| At March 31, 2024 | ||||||||||||||||
| 12-month ECL |
Lifetime ECL not credit- impaired |
Lifetime ECL credit- impaired |
Total | |||||||||||||
| (In millions) | ||||||||||||||||
| Allowance for loan losses: |
||||||||||||||||
| Balance at April 1, 2023 |
¥ | 187,455 | ¥ | 240,494 | ¥ | 436,165 | ¥ | 864,114 | ||||||||
| Net transfers between stages |
(4,779 | ) | (9,283 | ) | 14,062 | — | ||||||||||
| Provision for loan losses |
2,428 | 15,774 | 204,692 | 222,894 | ||||||||||||
| Charge-offs(1) |
— | — | 184,608 | 184,608 | ||||||||||||
| Recoveries |
— | — | 16,904 | 16,904 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net charge-offs |
— | — | 167,704 | 167,704 | ||||||||||||
| Others(2) |
11,221 | 10,557 | 37,918 | 59,696 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Balance at March 31, 2024 |
¥ | 196,325 | ¥ | 257,542 | ¥ | 525,133 | ¥ | 979,000 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | Charge-offs consist of the reduction of the allowance through the sales of loans and write-offs. |
| (2) | Others mainly include foreign exchange translations for the fiscal years ended March 31, 2025 and 2024. |
Impaired Loans and Advances
A portion of the total domestic and foreign loans and advances consists of impaired loans and advances, which are comprised of “potentially bankrupt, virtually bankrupt and bankrupt (loans and advances),” “past due three months or more (loans),” “restructured (loans)” and “other impaired (loans and advances).” The loans and advances for which management has serious doubts about the ability of the borrowers to comply in the near future with the repayment terms are wholly included in impaired loans and advances.
“Potentially bankrupt, virtually bankrupt and bankrupt (loans and advances)” comprise loans and advances to borrowers that are perceived to have a high risk of falling into bankruptcy, may not have been legally or formally declared bankrupt but are essentially bankrupt, or have been legally or formally declared bankrupt.
Loans classified as “past due three months or more (loans)” represent those loans that are three months or more past due as to principal or interest, which are not included in “potentially bankrupt, virtually bankrupt and bankrupt (loans and advances).”
The category “restructured (loans)” comprises loans not included above for which the terms of the loans have been modified to grant concessions because of problems with the borrower.
“Other impaired (loans and advances)” represent impaired loans and advances, which are not included in “potentially bankrupt, virtually bankrupt and bankrupt (loans and advances),” “past due three months or more (loans),” or “restructured (loans),” but are classified by management as impaired loans and advances due to certain information about credit problems.
86
Table of Contents
The following table shows the distribution of impaired loans and advances by “potentially bankrupt, virtually bankrupt and bankrupt (loans and advances),” “past due three months or more (loans),” “restructured (loans)” and “other impaired (loans and advances)” at March 31, 2025 and 2024 classified by domicile and type of industry of the borrowers. At March 31, 2025, gross impaired loans and advances were ¥1,290,812 million, a decrease of ¥47,632 million from ¥1,338,444 million at March 31, 2024. The ratio of gross impaired loans and advances to the outstanding loans and advances before deducting the allowance for loan losses, and adjusting unearned income, unamortized premiums-net and deferred loan fees-net was 1.0% at March 31, 2025, a decrease of 0.1 percentage points from 1.1% at March 31, 2024.
| At March 31, | ||||||||
| 2025 | 2024 | |||||||
| (In millions) | ||||||||
| Potentially bankrupt, virtually bankrupt and bankrupt (loans and advances): |
||||||||
| Domestic: |
||||||||
| Manufacturing |
¥ | 58,528 | ¥ | 87,636 | ||||
| Agriculture, forestry, fisheries and mining |
1,672 | 1,939 | ||||||
| Construction |
5,929 | 6,733 | ||||||
| Transportation, communications and public enterprises |
20,515 | 29,069 | ||||||
| Wholesale and retail |
48,317 | 75,109 | ||||||
| Finance and insurance |
5,563 | 148 | ||||||
| Real estate and goods rental and leasing |
28,680 | 25,541 | ||||||
| Services |
50,698 | 135,939 | ||||||
| Consumer |
148,529 | 135,310 | ||||||
| Others |
7,984 | 8,887 | ||||||
|
|
|
|
|
|||||
| Total domestic |
376,415 | 506,311 | ||||||
|
|
|
|
|
|||||
| Foreign: |
||||||||
| Financial institutions |
150 | 10,254 | ||||||
| Commerce and industry |
318,411 | 388,047 | ||||||
| Others |
93,244 | 70,674 | ||||||
|
|
|
|
|
|||||
| Total foreign |
411,805 | 468,975 | ||||||
|
|
|
|
|
|||||
| Total |
788,220 | 975,286 | ||||||
|
|
|
|
|
|||||
| Past due three months or more (loans): |
||||||||
| Domestic |
23,411 | 47,350 | ||||||
| Foreign |
51,051 | 26,954 | ||||||
|
|
|
|
|
|||||
| Total |
74,462 | 74,304 | ||||||
|
|
|
|
|
|||||
| Restructured (loans): |
||||||||
| Domestic |
229,075 | 196,398 | ||||||
| Foreign |
75,184 | 43,680 | ||||||
|
|
|
|
|
|||||
| Total |
304,259 | 240,078 | ||||||
|
|
|
|
|
|||||
| Other impaired (loans and advances): |
||||||||
| Domestic |
121,936 | 39,041 | ||||||
| Foreign |
1,935 | 9,735 | ||||||
|
|
|
|
|
|||||
| Total |
123,871 | 48,776 | ||||||
|
|
|
|
|
|||||
| Gross impaired loans and advances |
1,290,812 | 1,338,444 | ||||||
|
|
|
|
|
|||||
| Less: Allowance for loan losses for impaired loans and advances |
(555,490 | ) | (525,133 | ) | ||||
|
|
|
|
|
|||||
| Net impaired loans and advances |
¥ | 735,322 | ¥ | 813,311 | ||||
|
|
|
|
|
|||||
In addition to the discussion in this section, see Note 47 “Financial Risk Management—Credit Risk” to our consolidated financial statements included elsewhere in this annual report.
87
Table of Contents
Investment Securities
Our investment securities, including debt instruments at amortized cost, debt instruments at fair value through other comprehensive income and equity instruments at fair value through other comprehensive income, totaled ¥33,546,133 million at March 31, 2025, an increase of ¥3,396,296 million, or 11%, from ¥30,149,837 million at March 31, 2024. The increase in our investment securities was primarily due to an increase in our holdings of Japanese government bonds, which was partially offset by a decrease in our holdings of U.S. Treasury and other U.S. government agency bonds.
Our bond portfolio is principally held for asset and liability management purposes. It mostly consisted of Japanese government bonds, U.S. Treasury securities and bonds issued or guaranteed by foreign governments, government agencies or official institutions.
Our debt instruments at amortized cost amounted to ¥366,997 million at March 31, 2025, an increase of ¥50,605 million, or 16%, from ¥316,392 million at March 31, 2024, primarily due to increases in our holdings of Japanese government bonds and foreign mortgage-backed securities.
Domestic debt instruments at fair value through other comprehensive income amounted to ¥12,649,244 million at March 31, 2025, an increase of ¥3,253,299 million, or 35%, from ¥9,395,945 million at March 31, 2024. The increase was primarily due to an increase in our holdings of Japanese government bonds. As for our foreign debt instruments at fair value through other comprehensive income, we had ¥15,359,036 million at March 31, 2025, which was an increase of ¥738,797 million, or 5%, from ¥14,620,239 million at March 31, 2024. Most of our foreign debt instruments, including mortgage-backed securities, are issued or guaranteed by foreign governments, government agencies or official institutions. The increase was primarily due to increases in our holdings of bonds issued by governments and official institutions excluding U.S. Treasury and other U.S. government agency bonds and mortgage-backed securities, which were partially offset by a decrease in our holdings of U.S. Treasury and other U.S. government agency bonds. Net unrealized losses on our foreign debt instruments amounted to ¥492,699 million at March 31, 2025, as compared to net unrealized losses of ¥721,334 million at March 31, 2024. This was primarily due to an increase in the fair value of the foreign debt instruments held, reflecting a decrease in U.S. interest rates.
We had ¥3,362,996 million of domestic equity instruments and ¥1,807,860 million of foreign equity instruments at March 31, 2025, for which we made an irrevocable election at initial recognition to present subsequent changes in fair value in other comprehensive income under IFRS 9 “Financial Instruments.” Our domestic equity instruments, which consisted principally of publicly traded Japanese stocks and included common and preferred stocks issued by our customers, decreased by ¥1,035,914 million, or 24%, from ¥4,398,910 million at March 31, 2024 to ¥3,362,996 million at March 31, 2025. Net unrealized gains on our domestic equity instruments decreased by ¥862,500 million, or 27%, from ¥3,197,856 million at March 31, 2024 to ¥2,335,356 million at March 31, 2025. The decrease was primarily due to a decrease in the fair value of publicly traded Japanese stocks. Net unrealized gains on our foreign equity instruments increased by ¥236,545 million, or 21%, from ¥1,108,894 million at March 31, 2024 to ¥1,345,439 million at March 31, 2025, mainly reflecting favorable conditions in overseas stock markets.
We have no transactions pursuant to repurchase agreements, securities lending transactions or other transactions involving the transfer of financial assets with an obligation to repurchase such transferred assets that are treated as sales for accounting purposes.
88
Table of Contents
The following tables show the amortized cost, gross unrealized gains and losses, and fair value of our investment securities, which are classified as debt instruments at amortized cost, debt instruments at fair value through other comprehensive income and equity instruments at fair value through other comprehensive income at March 31, 2025 and 2024.
| At March 31, 2025 | ||||||||||||||||
| Amortized cost(1) |
Gross unrealized gains |
Gross unrealized losses |
Fair value | |||||||||||||
| (In millions) | ||||||||||||||||
| Debt instruments at amortized cost: |
||||||||||||||||
| Domestic: |
||||||||||||||||
| Japanese government bonds |
¥ | 109,550 | ¥ | — | ¥ | 1,893 | ¥ | 107,657 | ||||||||
| Japanese municipal bonds |
151,882 | — | 3,980 | 147,902 | ||||||||||||
| Japanese corporate bonds |
12,982 | — | 300 | 12,682 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total domestic |
274,414 | — | 6,173 | 268,241 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Foreign: |
||||||||||||||||
| Bonds issued by governments and official institutions excluding U.S. Treasury and other U.S. government agency bonds |
66,896 | 172 | 339 | 66,729 | ||||||||||||
| Mortgage-backed securities |
13,876 | 12 | 224 | 13,664 | ||||||||||||
| Other debt instruments |
11,811 | — | — | 11,811 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total foreign |
92,583 | 184 | 563 | 92,204 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
¥ | 366,997 | ¥ | 184 | ¥ | 6,736 | ¥ | 360,445 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Debt instruments at fair value through other comprehensive income: |
||||||||||||||||
| Domestic: |
||||||||||||||||
| Japanese government bonds |
¥ | 11,232,788 | ¥ | 120 | ¥ | 52,362 | ¥ | 11,180,546 | ||||||||
| Japanese municipal bonds |
864,378 | — | 41,803 | 822,575 | ||||||||||||
| Japanese corporate bonds |
697,264 | — | 51,662 | 645,602 | ||||||||||||
| Other debt instruments |
521 | — | — | 521 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total domestic |
12,794,951 | 120 | 145,827 | 12,649,244 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Foreign: |
||||||||||||||||
| U.S. Treasury and other U.S. government agency bonds |
5,770,587 | 14,684 | 246,220 | 5,539,051 | ||||||||||||
| Bonds issued by governments and official institutions excluding U.S. Treasury and other U.S. government agency bonds |
4,649,220 | 7,557 | 125,158 | 4,531,619 | ||||||||||||
| Mortgage-backed securities |
4,382,645 | 24,871 | 169,465 | 4,238,051 | ||||||||||||
| Other debt instruments |
1,049,283 | 1,827 | 795 | 1,050,315 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total foreign |
15,851,735 | 48,939 | 541,638 | 15,359,036 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
¥ | 28,646,686 | ¥ | 49,059 | ¥ | 687,465 | ¥ | 28,008,280 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Equity instruments at fair value through other comprehensive income: |
||||||||||||||||
| Domestic equity instruments |
¥ | 1,027,640 | ¥ | 2,355,292 | ¥ | 19,936 | ¥ | 3,362,996 | ||||||||
| Foreign equity instruments |
462,421 | 1,397,871 | 52,432 | 1,807,860 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
¥ | 1,490,061 | ¥ | 3,753,163 | ¥ | 72,368 | ¥ | 5,170,856 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
89
Table of Contents
| At March 31, 2024 | ||||||||||||||||
| Amortized cost(1) |
Gross unrealized gains |
Gross unrealized losses |
Fair value | |||||||||||||
| (In millions) | ||||||||||||||||
| Debt instruments at amortized cost: |
||||||||||||||||
| Domestic: |
||||||||||||||||
| Japanese government bonds |
¥ | 78,561 | ¥ | — | ¥ | 466 | ¥ | 78,095 | ||||||||
| Japanese municipal bonds |
142,557 | 28 | 966 | 141,619 | ||||||||||||
| Japanese corporate bonds |
12,977 | 14 | 15 | 12,976 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total domestic |
234,095 | 42 | 1,447 | 232,690 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Foreign: |
||||||||||||||||
| Bonds issued by governments and official institutions excluding U.S. Treasury and other U.S. government agency bonds |
77,578 | 204 | 126 | 77,656 | ||||||||||||
| Mortgage-backed securities |
2,703 | 16 | 10 | 2,709 | ||||||||||||
| Other debt instruments |
2,016 | 6 | — | 2,022 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total foreign |
82,297 | 226 | 136 | 82,387 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
¥ | 316,392 | ¥ | 268 | ¥ | 1,583 | ¥ | 315,077 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Debt instruments at fair value through other comprehensive income: |
||||||||||||||||
| Domestic: |
||||||||||||||||
| Japanese government bonds |
¥ | 7,601,999 | ¥ | 88 | ¥ | 54,710 | ¥ | 7,547,377 | ||||||||
| Japanese municipal bonds |
1,075,879 | 1 | 22,548 | 1,053,332 | ||||||||||||
| Japanese corporate bonds |
823,255 | 2 | 28,337 | 794,920 | ||||||||||||
| Other debt instruments |
316 | — | — | 316 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total domestic |
9,501,449 | 91 | 105,595 | 9,395,945 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Foreign: |
||||||||||||||||
| U.S. Treasury and other U.S. government agency bonds |
6,505,963 | 2,207 | 446,045 | 6,062,125 | ||||||||||||
| Bonds issued by governments and official institutions excluding U.S. Treasury and other U.S. government agency bonds |
4,244,042 | 6,174 | 105,881 | 4,144,335 | ||||||||||||
| Mortgage-backed securities |
3,725,055 | 13,290 | 192,780 | 3,545,565 | ||||||||||||
| Other debt instruments |
866,513 | 2,460 | 759 | 868,214 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total foreign |
15,341,573 | 24,131 | 745,465 | 14,620,239 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
¥ | 24,843,022 | ¥ | 24,222 | ¥ | 851,060 | ¥ | 24,016,184 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Equity instruments at fair value through other comprehensive income: |
||||||||||||||||
| Domestic equity instruments |
¥ | 1,201,054 | ¥ | 3,216,866 | ¥ | 19,010 | ¥ | 4,398,910 | ||||||||
| Foreign equity instruments |
309,457 | 1,154,722 | 45,828 | 1,418,351 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
¥ | 1,510,511 | ¥ | 4,371,588 | ¥ | 64,838 | ¥ | 5,817,261 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | “Amortized cost” for equity instruments at fair value through other comprehensive income represents the difference between the fair value and gross unrealized gains or losses. |
90
Table of Contents
The following tables show the fair value and gross unrealized losses of our investment securities, aggregated by the length of time that the individual securities have been in a continuous unrealized loss position at March 31, 2025 and 2024.
| At March 31, 2025 | ||||||||||||||||||||||||
| Less than twelve months | Twelve months or more | Total | ||||||||||||||||||||||
| Fair value | Gross unrealized losses |
Fair value | Gross unrealized losses |
Fair value | Gross unrealized losses |
|||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||
| Debt instruments at amortized cost: |
||||||||||||||||||||||||
| Domestic: |
||||||||||||||||||||||||
| Japanese government bonds |
¥ | 30,483 | ¥ | 495 | ¥ | 77,174 | ¥ | 1,398 | ¥ | 107,657 | ¥ | 1,893 | ||||||||||||
| Japanese municipal bonds |
25,725 | 586 | 122,177 | 3,394 | 147,902 | 3,980 | ||||||||||||||||||
| Japanese corporate bonds |
7,814 | 175 | 4,868 | 125 | 12,682 | 300 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total domestic |
64,022 | 1,256 | 204,219 | 4,917 | 268,241 | 6,173 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Foreign: |
||||||||||||||||||||||||
| Bonds issued by governments and official institutions excluding U.S. Treasury and other U.S. government agency bonds |
12,925 | 244 | 20,613 | 95 | 33,538 | 339 | ||||||||||||||||||
| Mortgage-backed securities |
9,663 | 173 | 1,595 | 51 | 11,258 | 224 | ||||||||||||||||||
| Other debt instruments |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total foreign |
22,588 | 417 | 22,208 | 146 | 44,796 | 563 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
¥ | 86,610 | ¥ | 1,673 | ¥ | 226,427 | ¥ | 5,063 | ¥ | 313,037 | ¥ | 6,736 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Debt instruments at fair value through other comprehensive income: |
||||||||||||||||||||||||
| Domestic: |
||||||||||||||||||||||||
| Japanese government bonds |
¥ | 9,203,842 | ¥ | 5,573 | ¥ | 1,458,266 | ¥ | 46,789 | ¥ | 10,662,108 | ¥ | 52,362 | ||||||||||||
| Japanese municipal bonds |
2,027 | 57 | 820,537 | 41,746 | 822,564 | 41,803 | ||||||||||||||||||
| Japanese corporate bonds |
— | — | 645,589 | 51,662 | 645,589 | 51,662 | ||||||||||||||||||
| Other debt instruments |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total domestic |
9,205,869 | 5,630 | 2,924,392 | 140,197 | 12,130,261 | 145,827 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Foreign: |
||||||||||||||||||||||||
| U.S. Treasury and other U.S. government agency bonds |
1,100,245 | 11,191 | 2,644,357 | 235,029 | 3,744,602 | 246,220 | ||||||||||||||||||
| Bonds issued by governments and official institutions excluding U.S. Treasury and other U.S. government agency bonds |
2,748,057 | 20,580 | 380,055 | 104,578 | 3,128,112 | 125,158 | ||||||||||||||||||
| Mortgage-backed securities |
1,044,244 | 9,339 | 903,629 | 160,126 | 1,947,873 | 169,465 | ||||||||||||||||||
| Other debt instruments |
365,688 | 718 | 9,923 | 77 | 375,611 | 795 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total foreign |
5,258,234 | 41,828 | 3,937,964 | 499,810 | 9,196,198 | 541,638 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
¥ | 14,464,103 | ¥ | 47,458 | ¥ | 6,862,356 | ¥ | 640,007 | ¥ | 21,326,459 | ¥ | 687,465 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Equity instruments at fair value through other comprehensive income: |
||||||||||||||||||||||||
| Domestic equity instruments |
¥ | 38,342 | ¥ | 6,251 | ¥ | 20,913 | ¥ | 13,685 | ¥ | 59,255 | ¥ | 19,936 | ||||||||||||
| Foreign equity instruments |
82,893 | 20,619 | 50,446 | 31,813 | 133,339 | 52,432 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
¥ | 121,235 | ¥ | 26,870 | ¥ | 71,359 | ¥ | 45,498 | ¥ | 192,594 | ¥ | 72,368 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
91
Table of Contents
| At March 31, 2024 | ||||||||||||||||||||||||
| Less than twelve months | Twelve months or more | Total | ||||||||||||||||||||||
| Fair value | Gross unrealized losses |
Fair value | Gross unrealized losses |
Fair value | Gross unrealized losses |
|||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||
| Debt instruments at amortized cost: |
||||||||||||||||||||||||
| Domestic: |
||||||||||||||||||||||||
| Japanese government bonds |
¥ | 78,095 | ¥ | 466 | ¥ | — | ¥ | — | ¥ | 78,095 | ¥ | 466 | ||||||||||||
| Japanese municipal bonds |
85,383 | 365 | 39,208 | 601 | 124,591 | 966 | ||||||||||||||||||
| Japanese corporate bonds |
4,976 | 15 | — | — | 4,976 | 15 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total domestic |
168,454 | 846 | 39,208 | 601 | 207,662 | 1,447 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Foreign: |
||||||||||||||||||||||||
| Bonds issued by governments and official institutions excluding U.S. Treasury and other U.S. government agency bonds |
5,848 | 64 | 16,035 | 62 | 21,883 | 126 | ||||||||||||||||||
| Mortgage-backed securities |
1,551 | 10 | — | — | 1,551 | 10 | ||||||||||||||||||
| Other debt instruments |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total foreign |
7,399 | 74 | 16,035 | 62 | 23,434 | 136 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
¥ | 175,853 | ¥ | 920 | ¥ | 55,243 | ¥ | 663 | ¥ | 231,096 | ¥ | 1,583 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Debt instruments at fair value through other comprehensive income: |
||||||||||||||||||||||||
| Domestic: |
||||||||||||||||||||||||
| Japanese government bonds |
¥ | 5,904,315 | ¥ | 3,219 | ¥ | 1,623,290 | ¥ | 51,491 | ¥ | 7,527,605 | ¥ | 54,710 | ||||||||||||
| Japanese municipal bonds |
14,505 | 23 | 1,038,729 | 22,525 | 1,053,234 | 22,548 | ||||||||||||||||||
| Japanese corporate bonds |
26,442 | 176 | 735,491 | 28,161 | 761,933 | 28,337 | ||||||||||||||||||
| Other debt instruments |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total domestic |
5,945,262 | 3,418 | 3,397,510 | 102,177 | 9,342,772 | 105,595 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Foreign: |
||||||||||||||||||||||||
| U.S. Treasury and other U.S. government agency bonds |
2,120,207 | 25,473 | 3,658,559 | 420,572 | 5,778,766 | 446,045 | ||||||||||||||||||
| Bonds issued by governments and official institutions excluding U.S. Treasury and other U.S. government agency bonds |
2,041,737 | 3,911 | 494,944 | 101,970 | 2,536,681 | 105,881 | ||||||||||||||||||
| Mortgage-backed securities |
1,236,761 | 10,088 | 1,062,246 | 182,692 | 2,299,007 | 192,780 | ||||||||||||||||||
| Other debt instruments |
280,780 | 742 | 9,983 | 17 | 290,763 | 759 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total foreign |
5,679,485 | 40,214 | 5,225,732 | 705,251 | 10,905,217 | 745,465 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
¥ | 11,624,747 | ¥ | 43,632 | ¥ | 8,623,242 | ¥ | 807,428 | ¥ | 20,247,989 | ¥ | 851,060 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Equity instruments at fair value through other comprehensive income: |
||||||||||||||||||||||||
| Domestic equity instruments |
¥ | 5,672 | ¥ | 549 | ¥ | 33,095 | ¥ | 18,461 | ¥ | 38,767 | ¥ | 19,010 | ||||||||||||
| Foreign equity instruments |
1,014 | 419 | 37,605 | 45,409 | 38,619 | 45,828 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
¥ | 6,686 | ¥ | 968 | ¥ | 70,700 | ¥ | 63,870 | ¥ | 77,386 | ¥ | 64,838 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
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Trading Assets
The following table shows our trading assets at March 31, 2025 and 2024. Our trading assets were ¥6,176,613 million at March 31, 2025, a decrease of ¥335,448 million from ¥6,512,061 million at March 31, 2024. The decrease was primarily due to decreases in our holdings of U.S. Treasury and other U.S. government agency bonds, and the fair value of publicly traded Japanese stocks.
| At March 31, | ||||||||
| 2025 | 2024 | |||||||
| (In millions) | ||||||||
| Debt instruments |
¥ | 5,511,465 | ¥ | 5,674,162 | ||||
| Equity instruments |
665,148 | 837,899 | ||||||
|
|
|
|
|
|||||
| Total trading assets |
¥ | 6,176,613 | ¥ | 6,512,061 | ||||
|
|
|
|
|
|||||
Financial Assets at Fair Value Through Profit or Loss
The following table shows the fair value of our financial assets at fair value through profit or loss at March 31, 2025 and 2024. The fair value was ¥2,902,969 million at March 31, 2025, an increase of ¥526,840 million from ¥2,376,129 million at March 31, 2024. The increase was primarily due to an increase in our holdings of investment funds.
| At March 31, | ||||||||
| 2025 | 2024 | |||||||
| (In millions) | ||||||||
| Debt instruments |
¥ | 2,820,665 | ¥ | 2,293,049 | ||||
| Equity instruments |
82,304 | 83,080 | ||||||
|
|
|
|
|
|||||
| Total financial assets at fair value through profit or loss |
¥ | 2,902,969 | ¥ | 2,376,129 | ||||
|
|
|
|
|
|||||
Liabilities
Our total liabilities increased by ¥10,683,937 million from ¥264,992,539 million at March 31, 2024 to ¥275,676,476 million at March 31, 2025, primarily due to increases in deposits and repurchase agreements and cash collateral on securities lent.
The following table shows our liabilities at March 31, 2025 and 2024.
| At March 31, | ||||||||
| 2025 | 2024 | |||||||
| (In millions) | ||||||||
| Deposits |
¥ | 190,022,742 | ¥ | 182,097,319 | ||||
| Call money and bills sold |
4,378,277 | 3,138,049 | ||||||
| Repurchase agreements and cash collateral on securities lent |
27,791,101 | 20,166,958 | ||||||
| Trading liabilities |
4,838,439 | 4,924,490 | ||||||
| Derivative financial instruments |
9,303,258 | 11,877,473 | ||||||
| Financial liabilities designated at fair value through profit or loss |
597,846 | 498,284 | ||||||
| Borrowings |
12,697,699 | 16,107,158 | ||||||
| Debt securities in issue |
14,387,415 | 14,075,084 | ||||||
| Provisions |
333,301 | 231,319 | ||||||
| Other liabilities |
10,821,441 | 11,025,782 | ||||||
| Current tax liabilities |
239,190 | 170,284 | ||||||
| Deferred tax liabilities |
265,767 | 680,339 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
¥ | 275,676,476 | ¥ | 264,992,539 | ||||
|
|
|
|
|
|||||
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Deposits
We offer a wide range of standard banking accounts through the offices of our banking subsidiaries in Japan, including non-interest-bearing demand deposits, interest-bearing demand deposits, deposits at notice, time deposits and negotiable certificates of deposit. Domestic deposits, 74% of total deposits, are our principal source of funds for our domestic operations. The deposits in the domestic offices of our banking subsidiaries are principally from individuals, private corporations, governmental bodies (including municipal authorities) and financial institutions.
SMBC’s foreign offices accept deposits mainly in U.S. dollars, but also in yen and other currencies, and are active participants in the Euro-currency market as well as the United States domestic money market. Foreign deposits mainly consist of stable types of deposits, such as deposits at notice, time deposits, and negotiable certificates of deposit.
Our deposit balances at March 31, 2025 were ¥190,022,742 million, an increase of ¥7,925,423 million, or 4%, from ¥182,097,319 million at March 31, 2024, due to an increase in deposits at domestic offices as well as foreign offices. The increase in deposits at domestic offices was primarily due to an increase in deposits from individual customers driven by our new money acquisition initiatives and from corporate customers as a result of our efforts to secure large deposits. The increase in deposits at foreign offices was primarily due to our efforts to expand our stable foreign currency funding sources.
The following table shows a breakdown of our domestic and foreign offices’ deposits at the dates indicated.
| At March 31, | ||||||||
| 2025 | 2024 | |||||||
| (In millions) | ||||||||
| Domestic offices: |
||||||||
| Non-interest-bearing demand deposits |
¥ | 29,902,509 | ¥ | 34,511,806 | ||||
| Interest-bearing demand deposits |
74,165,956 | 74,426,922 | ||||||
| Deposits at notice |
593,258 | 690,015 | ||||||
| Time deposits |
21,825,843 | 16,551,537 | ||||||
| Negotiable certificates of deposit |
4,264,295 | 3,583,425 | ||||||
| Others |
10,222,280 | 8,500,540 | ||||||
|
|
|
|
|
|||||
| Total domestic offices |
140,974,141 | 138,264,245 | ||||||
|
|
|
|
|
|||||
| Foreign offices: |
||||||||
| Non-interest-bearing demand deposits |
3,032,855 | 3,027,357 | ||||||
| Interest-bearing demand deposits |
6,204,646 | 5,811,763 | ||||||
| Deposits at notice |
14,062,549 | 12,443,021 | ||||||
| Time deposits |
12,656,739 | 11,332,102 | ||||||
| Negotiable certificates of deposit |
12,911,097 | 11,088,851 | ||||||
| Others |
180,715 | 129,980 | ||||||
|
|
|
|
|
|||||
| Total foreign offices |
49,048,601 | 43,833,074 | ||||||
|
|
|
|
|
|||||
| Total deposits |
¥ | 190,022,742 | ¥ | 182,097,319 | ||||
|
|
|
|
|
|||||
Borrowings
Borrowings include unsubordinated borrowings, subordinated borrowings, liabilities associated with securitization transactions of our own assets, and lease liabilities. At March 31, 2025, our borrowings were ¥12,697,699 million, a decrease of ¥3,409,459 million, or 21%, from ¥16,107,158 million at March 31, 2024. The decrease was primarily due to a decrease in unsubordinated borrowings.
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The following table shows the balances with respect to our borrowings at March 31, 2025 and 2024.
| At March 31, | ||||||||
| 2025 | 2024 | |||||||
| (In millions) | ||||||||
| Unsubordinated borrowings |
¥ | 11,043,243 | ¥ | 14,356,932 | ||||
| Subordinated borrowings |
130,971 | 159,427 | ||||||
| Liabilities associated with securitization transactions |
1,129,695 | 1,168,156 | ||||||
| Lease liabilities |
393,790 | 422,643 | ||||||
|
|
|
|
|
|||||
| Total borrowings |
¥ | 12,697,699 | ¥ | 16,107,158 | ||||
|
|
|
|
|
|||||
Debt Securities in Issue
Debt securities in issue at March 31, 2025 were ¥14,387,415 million, an increase of ¥312,331 million, or 2%, from ¥14,075,084 million at March 31, 2024, primarily due to increases in commercial paper and unsubordinated bonds.
| At March 31, | ||||||||
| 2025 | 2024 | |||||||
| (In millions) | ||||||||
| Commercial paper |
¥ | 3,571,097 | ¥ | 3,324,405 | ||||
| Unsubordinated bonds |
9,541,764 | 9,306,487 | ||||||
| Subordinated bonds |
1,274,554 | 1,444,192 | ||||||
|
|
|
|
|
|||||
| Total debt securities in issue |
¥ | 14,387,415 | ¥ | 14,075,084 | ||||
|
|
|
|
|
|||||
For further information, refer to Note 20 “Debt Securities in Issue” to our consolidated financial statements included elsewhere in this annual report, which sets forth summaries of debt securities in issue with their contractual interest rates and currencies.
In the normal course of business, we enter into contractual obligations that require future cash payments. “Item 5.B. Liquidity and Capital Resources — Contractual Obligations” sets forth a summary of our contractual cash obligations at March 31, 2025.
Total Equity
Our total equity increased by ¥209,496 million from ¥16,279,098 million at March 31, 2024 to ¥16,488,594 million at March 31, 2025, primarily due to an increase in equity attributable to other equity instruments holders. The increase in equity attributable to other equity instruments holders was primarily due to the issuances of perpetual subordinated bonds qualified as Additional Tier 1 capital.
For further information, refer to Note 25 “Shareholders’ Equity” and Note 26 “Equity Attributable to Other Equity Instruments Holders” to our consolidated financial statements included elsewhere in this annual report.
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| At March 31, | ||||||||
| 2025 | 2024 | |||||||
| (In millions) | ||||||||
| Capital stock |
¥ | 2,345,961 | ¥ | 2,344,038 | ||||
| Capital surplus |
663,063 | 663,265 | ||||||
| Retained earnings |
7,836,548 | 7,769,222 | ||||||
| Treasury stock |
(38,512 | ) | (167,671 | ) | ||||
|
|
|
|
|
|||||
| Equity excluding other reserves |
10,807,060 | 10,608,854 | ||||||
| Other reserves |
3,663,135 | 4,070,834 | ||||||
|
|
|
|
|
|||||
| Equity attributable to shareholders of Sumitomo Mitsui Financial Group, Inc. |
14,470,195 | 14,679,688 | ||||||
| Non-controlling interests |
150,022 | 137,066 | ||||||
| Equity attributable to other equity instruments holders |
1,868,377 | 1,462,344 | ||||||
|
|
|
|
|
|||||
| Total equity |
¥ | 16,488,594 | ¥ | 16,279,098 | ||||
|
|
|
|
|
|||||
Reconciliation with Japanese GAAP
Our consolidated financial statements are prepared in accordance with IFRS as summarized in Note 2 “Summary of Material Accounting Policies” to our consolidated financial statements included elsewhere in this annual report. These policies differ in some respects from Japanese GAAP. For reporting under the Financial Instruments and Exchange Act of Japan (“FIEA”) and Japanese banking regulations, we prepare our annual financial results in accordance with Japanese GAAP. To show the major reconciling items between our IFRS and Japanese GAAP consolidated financial statements, we have provided below, with respect to our most recent fiscal year, a reconciliation of consolidated net profit and total equity under IFRS with those amounts under Japanese GAAP.
| At and for the fiscal year ended March 31, 2025 |
||||||||
| Total equity | Net profit | |||||||
| (In millions) | ||||||||
| IFRS |
¥ | 16,488,594 | ¥ | 516,444 | ||||
| Differences arising from different accounting for: |
||||||||
| 1. Scope of consolidation |
67,697 | (8,128 | ) | |||||
| 2. Derivative financial instruments |
(224,432 | ) | 417,851 | |||||
| 3. Investment securities |
(518,775 | ) | 601,851 | |||||
| 4. Loans and advances |
515,943 | 102,956 | ||||||
| 5. Investments in associates and joint ventures |
253,891 | (13,976 | ) | |||||
| 6. Property, plant and equipment |
(2,613 | ) | 2,210 | |||||
| 7. Lease accounting |
7,209 | 2,180 | ||||||
| 8. Defined benefit plans |
472,410 | 69,149 | ||||||
| 9. Deferred tax assets |
(108,533 | ) | (32,617 | ) | ||||
| 10. Foreign currency translation |
— | (20,785 | ) | |||||
| 11. Classification of equity and liability |
(1,890,500 | ) | (38,648 | ) | ||||
| Others |
(153,292 | ) | (68,964 | ) | ||||
| Tax effect of the above |
(66,089 | ) | (342,645 | ) | ||||
|
|
|
|
|
|||||
| Japanese GAAP |
¥ | 14,841,510 | ¥ | 1,186,878 | ||||
|
|
|
|
|
|||||
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Table of Contents
The explanations below summarize certain differences between IFRS and Japanese GAAP that may be material. The paragraphs below refer to the corresponding items as set forth in the table above.
| 1. | Scope of consolidation |
Under Japanese GAAP, we consolidate an entity when we effectively control the decision-making body of the entity’s operating and financing policies. Control is generally presumed to exist when we own more than half of the voting power, or own from 40% to 50% of the voting power and certain facts exist indicating control. Certain entities established for securitization are presumed not to be controlled. Under IFRS, we consolidate an entity when we control the entity. Control is generally presumed to exist when we are exposed, or have rights, to variable returns from our involvement with the entity and have the ability to affect those returns through our power over the entity. The existence and effect of potential voting rights that are deemed to be substantive are taken into account when assessing the control. When assessing control of an entity under IFRS, we apply a single consolidation model to all types of entities, irrespective of their nature. This results in a difference in the scope of consolidation between Japanese GAAP and IFRS. Most significantly, certain entities designed for special purpose such as securitization, usually in the form of trusts under the Trust Act of Japan, are not consolidated under Japanese GAAP but consolidated under IFRS. Accordingly, both the cumulative gains on transfers of financial assets to these securitization vehicles and amortization of our retained subordinate interest under Japanese GAAP were not recognized under IFRS due to consolidation of such vehicles.
| 2. | Derivative financial instruments |
Under Japanese GAAP, an embedded derivative is separately accounted for when the host contract may suffer losses arising from the embedded derivative. Also, an entity may separately account for an embedded derivative if the entity manages it separately, even though the criteria for separation are not fully met. Under IFRS, when a hybrid contract contains a host that is not a financial asset, an embedded derivative is separated from the host contract and accounted for as a derivative if, and only if, its economic characteristics and risks are not closely related to those of the host contract. The separation of the embedded derivatives from the host contract is adjusted so as not to result in any gain or loss at initial recognition under IFRS. On the other hand, under IFRS, when a hybrid contract contains a host that is a financial asset, an embedded derivative is not separately accounted for from the host.
We apply hedge accounting under Japanese GAAP. However, the qualifying criteria for certain hedge accounting under IFRS are more rigorous than those under Japanese GAAP. Therefore, except for fair value hedge accounting and hedge accounting for net investments in foreign operations we apply under IFRS, the effects of hedge accounting under Japanese GAAP have been reversed under IFRS.
| 3. | Investment securities |
Under Japanese GAAP, stocks and financial instruments similar to stocks that are not traded in an active market, such as unlisted stocks, are measured at cost if they are classified as available-for-sale, whereas, under IFRS, those are measured at fair values determined by using valuation techniques.
Under Japanese GAAP, the changes in fair value of available-for-sale financial assets are recognized in other comprehensive income and subsequently transferred to profit or loss on their disposal. Under IFRS, we made an irrevocable election for some equity instruments to present subsequent changes in fair value in other comprehensive income. The changes in fair value of those equity instruments presented in other comprehensive income are not subsequently transferred to profit or loss. Some available-for-sale financial assets under Japanese GAAP, including investment funds, are classified as financial assets measured at fair value through profit or loss, and therefore the changes in their fair values are recognized in profit or loss under IFRS.
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| 4. | Loans and advances |
Under Japanese GAAP, the allowance for loan losses is calculated based on credit assessments at the end of the reporting period. A collective allowance is calculated using historical loss experience based on historical results according to the obligor grade, adding forward looking information as appropriate. The allowance for specifically identified significant loans is calculated by the discounted cash flow (“DCF”) method, which is based on the present value of reasonably estimated cash flows discounted at the original contractual interest rate of the relevant loan. For the remaining loans, an individual allowance is calculated based on the estimated uncollectible amount considering historical loss experience and the recoveries from collateral, guarantees and any other collectible cash flows.
Under IFRS, measurement of ECL depends on whether the credit risk on the financial asset has increased significantly since initial recognition. If there is not a significant increase in credit risk on that financial asset since initial recognition, an allowance is measured at an amount equal to 12-month expected credit losses. Otherwise, an allowance is measured at an amount equal to lifetime expected credit losses. The allowance for loan losses for individually significant impaired loans is calculated by the DCF method based on the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate, which differs from the calculation of the DCF method under Japanese GAAP. The scope of loans that are subject to the DCF method under IFRS is wider than that under Japanese GAAP. ECL are measured in a way that reflects not only past events, but also current conditions and forecasts of future economic conditions. Under Japanese GAAP, loan origination fees and costs are generally recognized in the consolidated income statement as incurred. Under IFRS, loan origination fees and costs that are incremental and directly attributable to the origination of a loan are deferred and thus, included in the calculation of the effective interest rate.
Under both Japanese GAAP and IFRS, undrawn loan commitments are off-balance sheet. Provisions for undrawn loan commitments are measured in a way similar to those for loans drawn down in accordance with each standard. Under Japanese GAAP, all guarantee contracts are accounted for by accruing both asset and liability accounts at the nominal guarantee amount. A provision for the credit risk of the guarantee is calculated using the same method as the reserve for possible loan losses. Under IFRS, financial guarantees are initially recognized at fair value and subsequently measured at the higher of the amount of the loss allowance determined in accordance with ECL or the amount initially recognized less, when appropriate, the cumulative amount of income recognized in accordance with the principles of IFRS 15 “Revenue from Contracts with Customers.”
| 5. | Investments in associates and joint ventures |
Under Japanese GAAP, although goodwill related to investments in associates and joint ventures is included in the carrying amount of the investments, we are required to recognize and measure impairment losses only on goodwill separately from the investments if impairment indicators for the goodwill are identified. Under IFRS, for investments in associates and joint ventures, if we identify objective evidence of impairment, the entire carrying amount of the investment is tested for impairment since goodwill is not separately recognized on the initial acquisition of the investment. Additionally, the net profit of associates and joint ventures is adjusted for differences between Japanese GAAP and IFRS in accordance with our accounting policy prior to applying the equity method under IFRS.
| 6. | Property, plant and equipment |
For certain assets that are depreciated using the declining balance method under Japanese GAAP, we apply the straight-line method of depreciation to those assets under IFRS as we consider that the straight-line method most closely reflects the expected pattern of consumption of the future economic benefits embodied in those assets. Additionally, under IFRS, residual values of assets are reviewed at least at the end of each reporting period. After reviews of all categories of property, plant and equipment, the residual values of assets are considered to be zero under IFRS, whereas residual values are assigned to certain assets under Japanese GAAP.
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Furthermore, under IFRS, when any indication that assets may be impaired exists, the recoverable amount of an asset shall be determined. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount and an impairment loss is recognized to the extent that the carrying amount of the asset exceeds its recoverable amount. On the other hand, under Japanese GAAP, when there is an indicator of impairment, whether impairment exists shall be determined by comparing the carrying amount of the asset to the undiscounted future cash flow. Then, if the undiscounted cash flows are lower than the carrying amount, the carrying amount is not considered to be recoverable and an impairment loss is recognized for the difference between the carrying amount and the recoverable amount.
| 7. | Lease accounting |
Under Japanese GAAP, a lease transaction as a lessee is classified as either a finance lease or an operating lease. Finance leases are recognized as assets and liabilities in statements of financial position, so there is no significant difference from IFRS. On the other hand, a lessee does not recognize assets and liabilities for operating leases. Operating lease payments are recognized in the consolidated income statements on a straight-line basis over the lease term. Under IFRS, a single lessee accounting model, whereby a lessee accounts for all leases in the same way, requires a lessee to recognize a right of use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments at the commencement date. After the commencement date, a right of use asset is measured applying the straight-line method of depreciation, and a lease liability is measured by increasing the carrying amount to reflect interest and reducing the carrying amount to reflect the lease payments.
| 8. | Defined benefit plans |
Under Japanese GAAP, the present value of the defined benefit obligation is measured using the market yields of long-term Japanese government bonds as discount rates. Additionally, the discount rates for the previous reporting period can be used for the current reporting period, if the change in the present value of the defined benefit obligation caused by a change in the discount rates from the previous reporting period to the current reporting period is less than 10%. Under IFRS, the present value of the defined benefit obligation is measured by discounting the estimated timing and amount of benefit payments using the discount rates reflecting market yields on high quality corporate bonds at the end of each reporting period. Furthermore, when the net defined benefit asset, which is the fair value of plan assets less the present value of the defined benefit obligation, is in surplus, the recognized asset is limited to the present value of any economic benefits available, whereas there is no such a specific requirement under Japanese GAAP.
Under Japanese GAAP, the expected rates of return on plan assets for the previous reporting period can be used for the current reporting period, unless the impact of the profit or loss for the current reporting period is considered to be significant. Under IFRS, the interest cost and expected return on plan assets are replaced with a net interest amount which is calculated by applying the discount rate to the net defined benefit liability (asset).
Under Japanese GAAP, the actuarial gains and losses are recognized in other comprehensive income, and are amortized using the straight-line method. Under IFRS, actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in the year, and return on plan assets excluding interest income are recognized in other comprehensive income and are never reclassified to profit and loss.
Under Japanese GAAP, past service costs are recognized in other comprehensive income and are amortized using the straight-line method. Under IFRS, past service costs are recognized immediately in the consolidated income statement.
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| 9. | Deferred tax assets |
Under Japanese GAAP, we recognize deferred tax assets to the extent that the realization of the tax benefit is highly probable based on the schedule. Under IFRS, deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. For example, deferred tax assets for deductible temporary differences relating to impairment of financial instruments of which the timing of the reversal is difficult to estimate cannot be recognized under Japanese GAAP, whereas they can be recognized under IFRS to the extent that it is probable that future taxable profit will be available.
| 10. | Foreign currency translation |
Under Japanese GAAP, the income statement items of certain foreign operations are translated into Japanese yen, our presentation currency, using the (spot) closing rate, whereas under IFRS they are translated into the presentation currency using the exchange rate at the dates of the transactions or, if the exchange rates do not fluctuate significantly, at average exchange rates. In addition, under Japanese GAAP, certain foreign operations’ monetary items denominated in foreign currencies are translated into Japanese yen using the exchange rate at the end of the reporting period. However, under IFRS the monetary items for which settlement is neither planned nor likely to occur in the foreseeable future are translated using the exchange rates at the dates of initial transactions.
| 11. | Classification of equity and liability |
Under Japanese GAAP, a financial instrument is generally classified as an equity instrument or a financial liability in light of its legal form. Under IFRS, a financial instrument or its component parts are classified as equity instruments or financial liabilities in accordance with the substance of the contractual arrangement and the definitions of financial liabilities and equity instruments. A financial instrument is classified as a financial liability if there is a contractual obligation to deliver cash or another financial asset other than a fixed number of equity shares in exchange for a fixed amount of cash or another financial asset. In the absence of such a contractual obligation, the financial instrument is classified as an equity instrument.
5.B. LIQUIDITY AND CAPITAL RESOURCES
We consistently endeavor to enhance the management of our liquidity profile and strengthen our capital base to meet our customers’ loan requirements and deposit withdrawals and respond to unforeseen situations such as adverse movements in equity, foreign currency, interest rate and other markets, or changes in general domestic or international conditions.
Liquidity
We derive funding for our operations both from domestic and international sources. Our domestic funding is derived primarily from deposits placed with SMBC by its corporate and individual customers, and also from call money (inter-bank), bills sold (inter-bank promissory notes), repurchase agreements, borrowings, and negotiable certificates of deposit issued by SMBC to domestic and international customers. Our international sources of funds are principally from deposits from corporate customers and foreign central banks, negotiable certificates of deposit, bonds, commercial paper, and also from repurchase agreements and cash collateral on securities lent. We closely monitor maturity gaps and foreign exchange exposure in order to manage our liquidity profile.
As shown in the following table, total deposits increased by ¥7,925,423 million, or 4%, from ¥182,097,319 million at March 31, 2024 to ¥190,022,742 million at March 31, 2025. The balance of deposits at March 31, 2025 exceeded the balance of loans and advances by ¥64,831,923 million, primarily due to the stable deposit base in Japan. Our loan-to-deposit ratio (total loans and advances divided by total deposits) in the same period was 66%, which contributed greatly to the reduction of our liquidity risk. Our balances of large-
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denomination domestic yen time deposits are stable due to the historically high rollover rate of our corporate customers and individual depositors.
| At March 31, | ||||||||
| 2025 | 2024 | |||||||
| (In millions) | ||||||||
| Loans and advances |
¥ | 125,190,819 | ¥ | 121,716,465 | ||||
| Deposits |
190,022,742 | 182,097,319 | ||||||
We have invested the excess balance of deposits against loans and advances primarily in marketable securities and other highly liquid assets, such as Japanese government bonds. SMBC’s Global Markets Business Unit actively monitors the movement of interest rates and maturity profile of its bond portfolio as part of SMBC’s overall risk management. The bonds can be used to enhance liquidity. When needed, they can be used as collateral for call money or other money market funding or short-term borrowings from the BOJ.
Secondary sources of liquidity include short-term debts, such as call money, bills sold, and commercial paper issued at an inter-bank or other wholesale markets. We also issue long-term debts, including both senior and subordinated debts, as additional sources of liquidity. With short- and long-term debts, we can diversify our funding sources, effectively manage our funding costs and enhance our capital adequacy ratios when appropriate.
We source our funding in foreign currencies primarily from financial institutions, general corporations, and institutional investors, through short- and long-term financing. Even if we encounter declines in our credit quality or that of Japan in the future, we expect to be able to purchase foreign currencies in sufficient amounts using the yen funds raised through our domestic customer base. As further measures to support our foreign currency liquidity, we hold foreign debt securities, maintain credit lines and swap facilities denominated in foreign currencies, and pledge collateral to the U.S. Federal Reserve Bank.
We maintain management and control systems to support our ability to access liquidity on a stable and cost-effective basis. For further information, see “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk—Market Risk and Liquidity Risk—Framework for Market and Liquidity Risk Management.”
We believe we are able to access such sources of liquidity on a stable and flexible basis by keeping credit ratings at a high level. The following table shows credit ratings assigned to the Company by Moody’s Japan K.K. (“Moody’s”), S&P Global Ratings Japan Inc. (“S&P”) and Fitch Ratings Japan Limited (“Fitch”) at May 31, 2025:
| At May 31, 2025 | ||||||||||||||||
| Moody’s |
S&P |
Fitch | ||||||||||||||
| Long-term |
Outlook |
Short-term |
Long-term |
Outlook |
Short-term |
Long-term |
Outlook |
Short-term | ||||||||
| A1 |
S | P-1 | A- | S | — | A- | S | F1 | ||||||||
The following table shows credit ratings assigned to SMBC by Moody’s, S&P and Fitch at May 31, 2025:
| At May 31, 2025 | ||||||||||||||||
| Moody’s |
S&P |
Fitch | ||||||||||||||
| Long-term |
Outlook |
Short-term |
Long-term |
Outlook |
Short-term |
Long-term |
Outlook |
Short-term | ||||||||
| A1 |
S | P-1 | A | S | A-1 | A | S | F1 | ||||||||
We are assigned credit ratings by major domestic and international credit rating agencies. Credit ratings do not constitute recommendations to purchase, sell or hold a security, and rating agencies may review or indicate an intention to review ratings at any time. While the methodology and rating system vary among rating agencies,
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credit ratings are generally based on information provided by us or independent sources, and can be influenced by the credit ratings of Japanese government bonds and broader views of the Japanese financial system. Any downgrade in or withdrawal of these credit ratings, or any adverse change in these ratings relative to other financial institutions, could increase our borrowing costs, reduce our access to the capital markets and otherwise negatively affect our ability to raise funds, which in turn could have a negative impact on our liquidity position.
The guidelines published by the Financial Services Agency of Japan (“FSA”) for liquidity coverage ratio (“LCR”) and net stable funding ratio (“NSFR”) applicable to banks and bank holding companies with international operations are based on the full text of the LCR and NSFR standard issued by the Basel Committee on Banking Supervision (“BCBS”) in January 2013 and October 2014, respectively. Under these guidelines, banks and bank holding companies with international operations must maintain LCRs and NSFRs of at least 100% on both a consolidated basis and a nonconsolidated basis. The following tables show the Company and SMBC’s LCRs for the three months ended March 31, 2025 and NSFRs at March 31, 2025. Each figure is calculated based on our financial statements prepared in accordance with Japanese GAAP, as required by the FSA’s LCR and NSFR guidelines.
Liquidity coverage ratio:
| For the three months ended March 31, 2025(1) |
||||
| SMFG (consolidated) |
137.8 | % | ||
| SMBC (consolidated) |
143.9 | % | ||
| SMBC (nonconsolidated) |
149.0 | % | ||
| (1) | Under the FSA’s LCR guidelines, the LCR for the three months ended March 31, 2025 is set as the three-month average of daily LCRs for the same three months, which is calculated by dividing the balance of high-quality liquid assets by the total net cash outflows on a daily basis for the same three months. |
Net stable funding ratio:
| At March 31, 2025(1) | ||||
| SMFG (consolidated) |
116.4 | % | ||
| SMBC (consolidated) |
124.4 | % | ||
| SMBC (nonconsolidated) |
122.9 | % | ||
| (1) | Under the FSA’s NSFR guidelines, the NSFR is calculated by dividing the available amount of stable funding by the required amount of stable funding. |
For further information, see “Item 4.B. Business Overview—Regulations in Japan—Regulations Regarding Capital Adequacy and Liquidity—Liquidity Requirement.”
Capital Management
With regard to capital management, we strictly abide by the capital adequacy guidelines set by the FSA. Japan’s capital adequacy guidelines are based on the Basel Capital Accord, which was proposed by the BCBS for uniform application to all banks which have international operations in industrialized countries. Japan’s capital adequacy guidelines may be different from those of central banks or supervisory bodies of other countries because they have been designed by the FSA to suit the Japanese banking environment. Our banking subsidiaries outside of Japan are also subject to the local capital ratio requirements.
Each figure for the FSA capital adequacy guidelines is calculated based on our financial statements prepared under Japanese GAAP.
The FSA capital adequacy guidelines permit Japanese banks to choose from the standardized approach, the foundation internal ratings-based (“IRB”) approach and the advanced IRB approach for measuring credit risk.
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Banks are permitted to calculate the Internal Loss Multiplier (“ILM”) using internal loss data for measuring operational risk, provided that specific conditions are met. To be eligible to adopt the foundation IRB approach or the advanced IRB approach for measuring credit risk, and to calculate the ILM with internal loss data for measuring operational risk, a Japanese bank must establish advanced risk management systems and receive prior approval from the FSA.
We and SMBC have adopted the advanced IRB approach for measuring credit risk since March 2009 and the standardized measurement approach by using the ILM for measuring operational risk since March 2024.
In December 2010, the BCBS published the new Basel III rules text to implement the Basel III framework, which sets out higher and better-quality capital, better risk coverage, the introduction of a leverage ratio as a backstop to the risk-based requirement, measures to promote the build-up of capital that can be drawn down in periods of stress, and the introduction of two global liquidity standards. The main measures of the minimum capital requirements in the Basel III framework began in January 2013 and have been fully applied from January 2019. The minimum common equity requirement, the minimum Tier 1 capital requirement and the total minimum capital requirement have been 4.5%, 6% and 8%, respectively, since January 2015. Moreover, banks have been required to hold a capital conservation buffer of 2.5% to withstand future periods of stress since January 2019. As a result, taking the capital conservation buffer into account, the minimum common equity requirement, the minimum Tier 1 capital requirement and the total minimum capital requirement have been 7%, 8.5% and 10.5%, respectively, since January 2019. Furthermore, a countercyclical buffer within a range of 0% to 2.5% of common equity or other fully loss-absorbing capital has been implemented according to national circumstances and we are required to hold a countercyclical buffer of 0.16% at March 31, 2025.
In addition to the above-mentioned minimum capital requirements and capital buffer requirements under Basel III, organizations identified by the FSB as G-SIBs, which includes us, are required to maintain an additional 1% to 2.5% of Common Equity Tier 1 capital as a percentage of risk-weighted assets based on the organization’s size, interconnectedness, substitutability, complexity and cross-jurisdictional activity as determined by the FSB. The amount of G-SIB capital surcharge that applies to us based on the FSB’s determination is 1%. The FSB updates its list of G-SIBs on an annual basis.
To reflect the Basel III framework, the FSA changed its capital adequacy guidelines. The minimum Common Equity Tier 1 capital requirement, Tier 1 capital requirement and total capital requirement have been 4.5%, 6% and 8%, respectively since March 2015. The capital conservation buffer, countercyclical buffer and the G-SIB capital surcharge started to be phased in from March 2016 and have been fully applied from March 2019 under the FSA capital adequacy guidelines.
In December 2017, the GHOS finalized the Basel III regulatory reforms, and Japanese regulations in accordance with the finalized reforms have been applied to banks and bank holding companies with international operations since March 2024. For further information regarding the finalized Basel III reforms, see “Item 4.B. Business Overview—Regulations in Japan—Regulations Regarding Capital Adequacy and Liquidity—Capital Adequacy Requirement.”
In March 2015, the FSA published its leverage ratio guidelines, which have been applied from March 2015, to help ensure broad and adequate capture of both on- and off-balance sheet sources of leverage for internationally active banks. The FSA’s leverage ratio guidelines are based on the text of the leverage ratio framework and disclosure requirements issued by the BCBS in January 2014.
In December 2017, the definition and requirements of the leverage ratio were revised as part of the finalized Basel III reforms, under which the leverage ratio is based on a Tier 1 definition of capital and with the minimum leverage ratio of 3%. Under the finalized Basel III reforms, G-SIBs are required to meet a leverage ratio buffer, which takes the form of a Tier 1 capital buffer set at 50% of the applicable G-SIB capital surcharge. Various refinements were also made to the definition of the leverage ratio exposure measure. The leverage ratio
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requirements under the definition based on the framework issued by the BCBS in January 2014 were implemented as a Pillar 1 measurement from January 2018, and those under the revised definition and the leverage ratio buffer requirement for G-SIBs were implemented as a Pillar 1 measurement from January 2023.
In March 2019, the FSA published its guidelines for the leverage ratio applicable to banks and bank holding companies with international operations, which have been applied from March 2019. Under the FSA’s guidelines for the leverage ratio, banks and bank holding companies with international operations must maintain a leverage ratio of at least 3% on both a consolidated basis and a nonconsolidated basis for banks and on a consolidated basis for bank holding companies.
In June 2020, the FSA published and implemented amendments to its guidelines for the leverage ratio, which mainly exclude deposits with the BOJ from the denominator for the calculation of the leverage ratio in order to maintain harmonization with the monetary policy implemented by the BOJ and the prudential regulations for banks and other financial institutions. In July 2022, the FSA published amendments to its guidelines for the leverage ratio. Under the amended guidelines, the leverage ratio buffer requirement for G-SIBs in Japan took effect from March 2023, while the finalized definition of the leverage ratio exposure measure took effect from March 31, 2024, except for banks that had notified the FSA that they wished to apply the amended requirements earlier. Furthermore, in November 2022, the FSA published amendments to its guidelines for the leverage ratio, which provided that, effective from April 1, 2024, the minimum leverage ratio was increased from 3% to 3.15%, the minimum leverage-based Total Loss-Absorbing Capacity ratio was increased from 6.75% to 7.10% and the leverage buffer applicable to G-SIBs was increased by 0.05%, while continuing to exclude amounts of deposits with the BOJ from the total exposure, taking into account exceptional macroeconomic conditions and other circumstances.
The table below presents our risk-weighted capital ratios, total capital, risk-weighted assets and leverage ratio under Japanese GAAP at March 31, 2025, based on the Basel III rules.
| At March 31, 2025 | ||||
| (In billions, except percentages) |
||||
| SMFG Consolidated: |
||||
| Total risk-weighted capital ratio |
15.18 | % | ||
| Tier 1 risk-weighted capital ratio |
14.23 | % | ||
| Common Equity Tier 1 risk-weighted capital ratio |
12.44 | % | ||
| Total capital (Common Equity Tier 1 capital + Additional Tier 1 capital + Tier 2 capital) |
¥ | 14,144.1 | ||
| Tier 1 capital (Common Equity Tier 1 capital + Additional Tier 1 capital) |
13,258.8 | |||
| Common Equity Tier 1 capital |
11,585.1 | |||
| Risk-weighted assets |
93,117.1 | |||
| The amount of minimum total capital requirements(1) |
7,449.4 | |||
| Leverage ratio |
5.01 | % | ||
| (1) | The amount of minimum total capital requirements is calculated by multiplying risk-weighted assets by 8%. |
Common Equity Tier 1 capital consists primarily of capital stock, capital surplus and retained earnings relating to common shares, unrealized gains and losses included in accumulated other comprehensive income, and non-controlling interests that meet the criteria set forth in the FSA capital adequacy guidelines for inclusion in Common Equity Tier 1 capital.
Non-controlling interests arising from the issue of common shares by a fully consolidated subsidiary of a bank may receive recognition in Common Equity Tier 1 capital only if: (1) the instrument giving rise to the non-controlling interest would, if issued by the bank, meet all of the criteria set forth in the FSA capital adequacy guidelines for classification as common shares for regulatory capital purposes; and (2) the subsidiary that issued the instrument is itself a bank or other financial institution subject to similar capital adequacy guidelines.
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Regulatory adjustments such as goodwill and other intangibles, deferred tax assets, investments in the common equity capital of banking, financial and insurance entities and defined benefit pension fund assets and liabilities are applied mainly to the calculation of Common Equity Tier 1 capital in the form of a deduction.
Additional Tier 1 capital consists primarily of perpetual subordinated bonds.
Tier 2 capital consists primarily of subordinated debt securities.
Our capital position and SMBC’s capital position depend in part on the fair market value of our investment securities portfolio, since unrealized gains and losses are included in the amount of regulatory capital and have been fully counted as Common Equity Tier 1 capital since March 2018. Since our other securities (including money held in trust) with a readily ascertainable market value included unrealized gains and losses, substantial fluctuations in the Japanese stock markets may affect our capital position and the capital position of SMBC.
Set forth below is a table of risk-weighted capital ratios, total capital, risk-weighted assets and leverage ratio of SMBC at March 31, 2025 on a consolidated and nonconsolidated basis.
| At March 31, 2025 | ||||
| (In billions, except percentages) |
||||
| SMBC Consolidated: |
||||
| Total risk-weighted capital ratio |
16.78 | % | ||
| Tier 1 risk-weighted capital ratio |
15.32 | % | ||
| Common Equity Tier 1 risk-weighted capital ratio |
12.50 | % | ||
| Total capital (Common Equity Tier 1 capital + Additional Tier 1 capital + Tier 2 capital) |
¥ | 13,593.3 | ||
| Tier 1 capital (Common Equity Tier 1 capital + Additional Tier 1 capital) |
12,410.7 | |||
| Common Equity Tier 1 capital |
10,129.9 | |||
| Risk-weighted assets |
81,008.5 | |||
| The amount of minimum total capital requirements(1) |
6,480.7 | |||
| Leverage ratio |
5.10 | % | ||
| SMBC Nonconsolidated: |
||||
| Total risk-weighted capital ratio |
14.72 | % | ||
| Tier 1 risk-weighted capital ratio |
13.03 | % | ||
| Common Equity Tier 1 risk-weighted capital ratio |
10.01 | % | ||
| Total capital (Common Equity Tier 1 capital + Additional Tier 1 capital + Tier 2 capital) |
¥ | 10,832.3 | ||
| Tier 1 capital (Common Equity Tier 1 capital + Additional Tier 1 capital) |
9,589.8 | |||
| Common Equity Tier 1 capital |
7,365.2 | |||
| Risk-weighted assets |
73,556.5 | |||
| The amount of minimum total capital requirements(1) |
5,884.5 | |||
| Leverage ratio |
4.41 | % | ||
| (1) | The amount of minimum total capital requirements is calculated by multiplying risk-weighted assets by 8%. |
Our securities subsidiary in Japan, SMBC Nikko Securities is also subject to capital adequacy requirements under the FIEA described in “Item 4.B. Business Overview—Regulations in Japan—Regulations Regarding Capital Adequacy and Liquidity.” At March 31, 2025, the capital adequacy ratio was 314.8% for SMBC Nikko Securities, and sufficiently above 140%, below which level it would be required to file daily reports with the Commissioner of the FSA.
Off-Balance Sheet Arrangements
To meet our customers’ financial needs, we engage in various types of off-balance sheet arrangements in the ordinary course of business.
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Our arrangements include loan commitments, financial guarantees and other credit-related contingent liabilities. Loan commitment contracts on overdrafts and loans are agreements to lend up to a prescribed amount to customers, as long as there is no violation of any condition established in the contracts. Financial guarantees are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of the debt instrument. Other credit-related contingent liabilities include performance bonds, which are contracts that provide compensation if another party fails to perform the contractual obligation.
The table below shows the nominal amounts of undrawn loan commitments, and financial guarantees and other credit-related contingent liabilities at March 31, 2025 and 2024.
| At March 31, | ||||||||
| 2025 | 2024 | |||||||
| (In millions) | ||||||||
| Loan commitments |
¥ | 91,810,227 | ¥ | 88,926,181 | ||||
| Financial guarantees and other credit-related contingent liabilities |
15,139,799 | 14,869,558 | ||||||
|
|
|
|
|
|||||
| Total |
¥ | 106,950,026 | ¥ | 103,795,739 | ||||
|
|
|
|
|
|||||
The nominal amounts of these off-balance sheet instruments generally represent the maximum potential amounts of future payments without consideration of possible recoveries under recourse provisions or from collateral held. For example, since many of these loan commitments are expected to expire without being drawn down, the total amount of unused commitments does not necessarily represent an actual future cash flow requirement. Many of these loan commitments include clauses under which we can reject an application from customers or reduce the contract amounts in cases where economic conditions change, we need to secure claims, or some other significant event occurs. In addition, we may request the customers to pledge collateral such as premises and securities at the time of the contracts, and take necessary measures such as monitoring customers’ financial positions, revising contracts when the need arises and securing claims after the contracts are made. We regularly review the credit quality of the customer based on our risk management system as set forth in “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk” and Note 47 “Financial Risk Management” to our consolidated financial statements included elsewhere in this annual report.
In addition to the above-mentioned off-balance sheet arrangements, some of the SMBC Group’s off-balance sheet arrangements are related to activities of structured entities. For further information, refer to Note 50 “Structured Entities” to our consolidated financial statements included elsewhere in this annual report.
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Contractual Obligations
In the normal course of business, we enter into contractual obligations that require future cash payments. The following table sets forth a summary of our contractual cash obligations at March 31, 2025.
| At March 31, 2025 | ||||||||||||||||||||
| Due in one year or less |
Due from one year to three years |
Due from three years to five years |
Due after five years |
Total(1) | ||||||||||||||||
| (In millions) | ||||||||||||||||||||
| Time deposits |
¥ | 30,003,011 | ¥ | 2,700,833 | ¥ | 745,438 | ¥ | 1,054,158 | ¥ | 34,503,440 | ||||||||||
| Negotiable certificate of deposits |
16,585,206 | 337,230 | 210,660 | 42,296 | 17,175,392 | |||||||||||||||
| Financial liabilities designated at fair value through profit or loss |
44,221 | 101,704 | 79,461 | 418,224 | 643,610 | |||||||||||||||
| Borrowings |
4,589,113 | 5,090,260 | 530,156 | 2,115,212 | 12,324,741 | |||||||||||||||
| Debt securities in issue |
5,240,313 | 3,342,775 | 2,675,596 | 3,503,247 | 14,761,931 | |||||||||||||||
| Lease liabilities |
81,548 | 115,293 | 71,831 | 157,415 | 426,087 | |||||||||||||||
| Purchase obligation(2) |
63,707 | 28,012 | 1,894 | — | 93,613 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
¥ | 56,607,119 | ¥ | 11,716,107 | ¥ | 4,315,036 | ¥ | 7,290,552 | ¥ | 79,928,814 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | The amount of interest on debt instruments is not included in the maturity table above due to its insignificance. |
| (2) | Purchase obligation in the above table includes the contractual commitments to purchase goods or services of construction and information technology that are binding on us for the payment of more than ¥100 million. |
5.C. RESEARCH, DEVELOPMENT, PATENTS AND LICENSES
We did not conduct any significant research and development activities for the fiscal year ended March 31, 2025. However, there are certain research and development activities for our information system infrastructure.
5.D. TREND INFORMATION
Our trend information is contained elsewhere in this annual report, including but not limited to “Item 4.B. Business Overview,” and “—A. Operating Results,” and “—B. Liquidity and Capital Resources” in this Item.
5.E. CRITICAL ACCOUNTING ESTIMATES
For information about our critical accounting estimates, refer to Note 3 “Critical Accounting Estimates and Judgments” to our consolidated financial statements included elsewhere in this annual report.
| Item 6. | Directors, Senior Management and Employees |
6.A. DIRECTORS AND SENIOR MANAGEMENT
Directors and Senior Management
We are a company which has adopted a three statutory committees system of corporate governance. Under the Companies Act, a company with three statutory committees is required to have a nominating committee, an audit committee and a compensation committee, each of which consists of members of the board of directors and of which the majority of the members must be outside directors. In addition to the three statutory committees, we have voluntarily established our risk committee and sustainability committee. Also, under the Companies Act, a company with three statutory committees must have one or more corporate executive officers elected by resolution of the board of directors. Corporate executive officers decide on the execution of the operations of the company that were delegated to them by resolution of the board of directors. The board of directors decides on
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the execution of operations of the company, including basic management policy, and supervises the execution of duties by corporate executive officers.
Our board of directors is comprised of thirteen directors, seven of whom are outside directors as defined under the Companies Act. In addition, our board of directors has elected fourteen corporate executive officers.
For further information, refer to “Item 6.C. Board Practices.”
Directors
At June 27, 2025, the following directors held the indicated positions with us:
| Name |
Current positions and principal outside positions |
Business experience | ||||
| Makoto Takashima |
Chairman of the Board of the Company |
April 1982 | Joined Sumitomo Bank
| |||
| April 2009 | Executive Officer of SMBC
| |||||
| April 2012 | Managing Executive Officer of SMBC
| |||||
| April 2014 | Senior Managing Executive Officer of SMBC
| |||||
| December 2016 | Director and Senior Managing Executive Officer of SMBC
| |||||
| April 2017 | President of SMBC
| |||||
| June 2017 | Director of the Company
| |||||
| April 2023 | Chairman of the Board of SMBC
| |||||
| June 2023 | Retired as Director of the Company
| |||||
| June 2025 | Chairman of the Board of the Company (to present)
| |||||
| Retired as Director of SMBC
| ||||||
| Toru Nakashima |
Director President of the Company
Group Chief Executive Officer, or CEO |
April 1986 | Joined Sumitomo Bank
| |||
| April 2014 | Executive Officer of SMBC
| |||||
| April 2016 | Managing Executive Officer of SMBC
| |||||
| April 2017 | Managing Executive Officer of the Company
| |||||
| March 2019 | Director and Managing Executive Officer of SMBC
| |||||
| April 2019 | Senior Managing Corporate Executive Officer of the Company
| |||||
| Director and Senior Managing Executive Officer of SMBC
| ||||||
| June 2019 | Director Senior Managing Corporate Executive Officer of the Company
| |||||
| April 2022 | Resigned as Director of SMBC
| |||||
| March 2023 | Director of SMBC
| |||||
| April 2023 | Deputy President and Corporate Executive Officer of the Company
| |||||
| Director and Deputy President of SMBC
| ||||||
| December 2023 | President of the Company
| |||||
| Resigned as Director of SMBC
| ||||||
| June 2024 | Director President of the Company (to present)
| |||||
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| Name |
Current positions and principal outside positions |
Business experience | ||||
| Teiko Kudo |
Director Deputy President and Corporate Executive Officer of the Company (Representative Corporate Executive Officer)
Group Chief Compliance Officer, or CCO
Officer in charge of Compliance Department, Compliance Department, Americas Division, and Anti Money Laundering & Financial Crime Prevention Department
Director and Deputy President of SMBC |
April 1987 | Joined Sumitomo Bank
| |||
| April 2014 | Executive Officer of SMBC
| |||||
| April 2017 | Managing Executive Officer of SMBC
| |||||
| April 2020 | Senior Managing Executive Officer of the Company
| |||||
| Senior Managing Executive Officer of SMBC
| ||||||
| March 2021 | Director and Senior Managing Executive Officer of SMBC
| |||||
| April 2021 | Senior Managing Corporate Executive Officer of the Company
| |||||
| June 2021 | Director Senior Managing Corporate Executive Officer of the Company
| |||||
| April 2024 | Director Deputy President and Corporate Executive Officer of the Company (to present)
| |||||
| Director and Deputy President of SMBC (to present) | ||||||
| Kazuyuki Anchi |
Director Senior Managing Corporate Executive Officer of the Company
Group Chief Financial Officer, or CFO, and Group Chief Strategy Officer, or CSO
Officer in charge of Sustainability Division for Fulfilled Growth, Public Relations Department, Corporate Planning Department, Business Development Department, Asset & Wealth Management Strategy Department, Sustainability Planning Department, Sustainability Development Department, Financial Accounting Department and Accounting Service & Planning Department
Director and Senior Managing Executive Officer of SMBC |
April 1993 | Joined Sumitomo Bank | |||
| April 2020 | General Manager of Digital Strategy Department of the Company | |||||
| General Manger of Digital Strategy Department of SMBC | ||||||
| April 2021 | Executive Officer of the Company | |||||
| Executive Officer of SMBC | ||||||
| April 2023 | Managing Executive Officer of the Company | |||||
| Managing Executive Officer of SMBC | ||||||
| April 2025 | Senior Managing Corporate Executive Officer of the Company | |||||
| Director and Senior Managing Executive Officer of SMBC (to present) | ||||||
| June 2025 | Director Senior Managing Corporate Executive Officer of the Company (to present)
| |||||
| Toshihiro Isshiki |
Director of the Company | April 1985 | Joined Sumitomo Bank | |||
| April 2013 | Executive Officer of SMBC | |||||
| April 2015 | Managing Executive Officer of SMBC | |||||
| April 2017 | Managing Executive Officer of the Company | |||||
| April 2019 | Senior Managing Executive Officer of the Company | |||||
| Senior Managing Executive Officer of SMBC | ||||||
| April 2021 | Retired as Senior Managing Executive Officer of SMBC | |||||
| June 2021 | Director of the Company (to present) | |||||
| June 2023 | Director of SMBC | |||||
| June 2025 | Retired as Director of SMBC | |||||
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| Name |
Current positions and principal outside positions |
Business experience | ||||
| Honami Matsugasaki |
Director of the Company | April 1993 | Joined Sumitomo Bank | |||
| April 2020 | General Manager of Learning and Development Institute, Human Resources Department of the Company | |||||
| General Manager of Learning and Development Institute, Human Resources Department of SMBC | ||||||
| April 2021 | Executive Officer of the Company | |||||
| Executive Officer of SMBC | ||||||
| April 2023 | Retired as Executive Officer of the Company | |||||
| April 2024 | Executive Officer of the Company | |||||
| Resigned as Executive Officer of SMBC | ||||||
| June 2025 | Director of the Company (to present) | |||||
| Sonosuke Kadonaga(1) |
Director of the Company | April 1976 | Joined Chiyoda Corporation | |||
| June 1986 | Retired from Chiyoda Corporation | |||||
| August 1986 | Joined McKinsey & Company, Inc., Japan | |||||
| December 1992 | Principal (Partner) of McKinsey & Company, Inc., Japan | |||||
| June 1999 | Director (Senior Partner) of McKinsey & Company, Inc., Japan | |||||
| June 2009 | Retired from McKinsey & Company, Inc., Japan | |||||
| July 2009 | Representative of Intrinsics (to present) | |||||
| June 2017 | Director of SMBC | |||||
| June 2024 | Director of the Company (to present) | |||||
| Resigned as Director of SMBC | ||||||
| Jun Sawada(1) |
Director of the Company
Chairman and Member of the Board of NTT |
April 1978 | Joined Nippon Telegraph and Telephone Public Corporation (currently NIPPON TELEGRAPH AND TELEPHONE CORPORATION (NTT)) | |||
| June 2008 | Senior Vice President, Executive Manager of the Corporate Strategy Planning Department, Member of the Board of NTT Communications Corporation | |||||
| June 2011 | Executive Vice President Executive Manager of the Corporate Strategy Planning Department, Member of the Board of NTT Communications Corporation | |||||
| June 2012 | Senior Executive Vice President, Executive Manager of the Corporate Strategy Planning Department, Representative Member of the Board of NTT Communications Corporation | |||||
| June 2013 | Senior Executive Vice President, Representative Member of the Board of NTT Communications Corporation | |||||
| June 2014 | Senior Executive Vice President, Representative Member of the Board of NTT | |||||
| June 2018 | President and Chief Executive Officer, Representative Member of the Board of NTT | |||||
| June 2020 | President and Chief Executive Officer, Representative Member of the Board of NTT | |||||
| June 2022 | Chairman and Representative Member of the Board of NTT | |||||
| June 2024 | Chairman and Member of the Board of NTT (to present) | |||||
| June 2025 | Director of the Company (to present) | |||||
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| Name |
Current positions and principal outside positions |
Business experience | ||||
| Yoriko Goto(1) |
Director of the Company | November 1983 | Joined Deloitte Haskins and Sells International (currently Deloitte Touche Tohmatsu LLC) | |||
| March 1987 | Registered as a certified public accountant (to present) | |||||
| June 1996 | Partner of Tohmatsu & Co. (currently Deloitte Touche Tohmatsu LLC) | |||||
| November 2010 | Member of the Management Council of Deloitte Touche Tohmatsu LLC | |||||
| October 2013 | Member of Executive Committee in charge of the Financial Services Industry of Deloitte Touche Tohmatsu LLC | |||||
| Member of the Board of Deloitte Touche Tohmatsu Limited | ||||||
| June 2018 | Chairperson of the Board of Deloitte Tohmatsu Group | |||||
| Chairperson of the Board of Deloitte Touche Tohmatsu LLC | ||||||
| Member of the Board of Deloitte Touche Tohmatsu Limited | ||||||
| November 2018 | Member of the Board of Deloitte Asia Pacific Limited | |||||
| September 2022 | Retired as Partner of Deloitte Touche Tohmatsu LLC | |||||
| October 2022 | President of Yoriko Goto CPA Office (to present) | |||||
| Director of SMBC | ||||||
| June 2025 | Director of the Company (to present) | |||||
| Resigned as Director of SMBC | ||||||
| Isao Teshirogi(1) |
Director of the Company
Representative Director, President and CEO of Shionogi & Co., Ltd. |
April 1982 | Joined Shionogi & Co., Ltd. | |||
| June 2002 | Director of Shionogi & Co., Ltd. | |||||
| April 2004 | Director and Executive Officer of Shionogi & Co., Ltd. | |||||
| April 2006 | Director and Senior Executive Officer of Shionogi & Co., Ltd. | |||||
| April 2008 | Representative Director and President and CEO of Shionogi & Co., Ltd. | |||||
| June 2021 | Director of SMBC | |||||
| July 2022 | Representative Director, President and CEO of Shionogi & Co., Ltd. (to present) | |||||
| June 2025 | Director of the Company (to present) | |||||
| Retired as Director of SMBC | ||||||
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| Name |
Current positions and principal outside positions |
Business experience | ||||
| Norimitsu Takashima(1) |
Director of the Company | April 1989 | Public Prosecutor, Tokyo District Public Prosecutors Office
| |||
| December 2012 | Director of the Public Security Division, Criminal Affairs Bureau, Ministry of Justice
| |||||
| January 2014 | Director, Trial Division, Tokyo District Public Prosecutors Office
| |||||
| April 2015 | Deputy Director-General, Minister’s Secretariat, Ministry of Justice
| |||||
| July 2017 | Chief Prosecutor, Matsuyama District Public Prosecutors Office
| |||||
| July 2018 | Public Prosecutor, Supreme Public Prosecutors Office
| |||||
| September 2018 | Director-General, Human Rights Bureau, Ministry of Justice
| |||||
| April 2019 | Deputy Director-General, Immigration Services Agency
| |||||
| December 2020 | Deputy Vice Minister of Justice, Ministry of Justice
| |||||
| September 2021 | Vice-Minister of Justice, Ministry of Justice
| |||||
| January 2023 | Superintending Prosecutor, Nagoya High Public Prosecutors Office
| |||||
| July 2024 | Resigned as Public Prosecutor
| |||||
| October 2024 | Registered as an attorney at law (to present)
| |||||
| Attorney at law at T&K Partners (to present)
| ||||||
| June 2025 | Director of the Company (to present)
| |||||
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| Name |
Current positions and principal outside positions |
Business experience | ||||
| Charles D. Lake II(1) |
Director of the Company
President of Aflac International, Inc.
Chairman and Representative Director of Aflac Life Insurance Japan Ltd. |
June 1990 | Entered the Office of the U.S. Trade Representative as Special Counsel | |||
| December 1990 | Registered as an attorney at law, admitted in Pennsylvania, the U.S.A. (to present) | |||||
| August 1992 | Director of Japan Affairs, the Office of the U.S. Trade Representative | |||||
| July 1993 | Director of Japan Affairs and Special Counsel to the Deputy U.S. Trade Representative, the Office of the U.S. Trade Representative | |||||
| January 1995 | Attorney at law at Dewey Ballantine LLP | |||||
| October 1996 | Registered as an attorney at law, admitted in Washington, D.C., the U.S.A. (to present) | |||||
| February 1999 | Vice President and Counsel of Aflac International, Inc. | |||||
| June 1999 | Vice President and Counsel of Japan Branch, American Family Life Assurance Company of Columbus (currently Aflac Life Insurance Japan Ltd.) | |||||
| January 2001 | Senior Vice President and Counsel of Japan Branch, American Family Life Assurance Company of Columbus (currently Aflac Life Insurance Japan Ltd.) | |||||
| April 2001 | Senior Vice President and General Counsel of Japan Branch, American Family Life Assurance Company of Columbus (currently Aflac Life Insurance Japan Ltd.) | |||||
| July 2001 | Deputy President of Japan Branch, American Family Life Assurance Company of Columbus (currently Aflac Life Insurance Japan Ltd.) | |||||
| January 2003 | President and Representative in Japan of Japan Branch, American Family Life Assurance Company of Columbus (currently Aflac Life Insurance Japan Ltd.) | |||||
| April 2005 | Vice Chairman and Representative in Japan of Japan Branch, American Family Life Assurance Company of Columbus (currently Aflac Life Insurance Japan Ltd.) | |||||
| July 2008 | Chairman and Representative in Japan of Japan Branch, American Family Life Assurance Company of Columbus (currently Aflac Life Insurance Japan Ltd.) | |||||
| January 2014 | President of Aflac International, Inc. (to present) | |||||
| April 2018 | Chairman and Representative Director of Aflac Life Insurance Japan Ltd. (to present) | |||||
| June 2023 | Director of the Company (to present) | |||||
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| Name |
Current positions and principal outside positions |
Business experience | ||||
| Jenifer Rogers(1) |
Director of the Company
General Counsel International of Asurion Japan Holdings G.K. |
September 1989 | Joined Haight Gardner Poor & Havens (currently Holland & Knight LLP) | |||
| December 1990 | Registered as an attorney at law, admitted in New York, the U.S.A. (to present) | |||||
| February 1991 | Joined the Industrial Bank of Japan Ltd. (currently Mizuho Bank, Ltd.) | |||||
| December 1994 | Joined Merrill Lynch Securities Co., Ltd. (currently BofA Securities Japan Co., Ltd.) | |||||
| November 2000 | Merrill Lynch Europe Plc (currently Merrill Lynch Europe Limited) | |||||
| July 2006 | Merrill Lynch (Asia Pacific) Limited (currently Bank of America Corporation) (Hong Kong) | |||||
| January 2012 | Bank of America Merrill Lynch (currently Bank of America Corporation) (New York) | |||||
| November 2012 | General Counsel Asia of Asurion Asia Pacific Limited | |||||
| November 2014 | General Counsel Asia of Asurion Japan Holdings G.K. | |||||
| January 2021 | President of the American Chamber of Commerce in Japan | |||||
| June 2023 | Director of the Company (to present) | |||||
| January 2025 | General Counsel International of Asurion Japan Holdings G.K. (to present) | |||||
| (1) | These directors satisfy the requirements for an “outside director” under the Companies Act. |
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Corporate Executive Officers
At June 27, 2025, the following corporate executive officers held the indicated positions with us:
| Name |
Current positions and principal outside positions |
Business experience | ||||
| Toru Nakashima
|
See “Directors” under this Item 6.A. |
See “Directors” under this Item 6.A. | ||||
| Teiko Kudo
|
See “Directors” under this Item 6.A. |
See “Directors” under this Item 6.A. | ||||
| Yoshihiro Hyakutome |
Deputy President and Corporate Executive Officer of the Company (Representative Corporate Executive Officer)
Co-Head of Global Business Unit
Deputy President Executive Officer of SMBC |
April 1988 | Joined Sumitomo Bank
| |||
| April 2016 | Executive Officer of SMBC
| |||||
| April 2017 | Executive Officer of the Company
| |||||
| April 2018 | Managing Executive Officer of the Company
| |||||
| Managing Executive Officer of SMBC
| ||||||
| April 2022 | Senior Managing Corporate Executive Officer of the Company
| |||||
| Director and Senior Managing Executive Officer of SMBC
| ||||||
| April 2024 | Senior Managing Executive Officer of SMBC
| |||||
| April 2025 | Deputy President and Corporate Executive Officer of the Company (to present)
| |||||
| Deputy President Executive Officer of SMBC (to present)
| ||||||
| Takeshi Mikami |
Deputy President and Corporate Executive Officer of the Company (Representative Corporate Executive Officer)
Group Chief Audit Executive, or CAE
Officer in charge of Internal Audit Department |
April 1988 | Joined Sumitomo Bank
| |||
| April 2016 | Executive Officer of SMBC
| |||||
| April 2017 | Executive Officer of the Company
| |||||
| April 2019 | Managing Executive Officer of the Company
| |||||
| Managing Executive Officer of SMBC
| ||||||
| April 2020 | Resigned as Managing Executive Officer of the Company
| |||||
| April 2022 | Senior Managing Corporate Executive Officer of the Company
| |||||
| Retired as Managing Executive Officer of SMBC
| ||||||
| April 2025 | Deputy President and Corporate Executive Officer of the Company (to present)
| |||||
| Keiichiro Nakamura |
Senior Managing Corporate Executive Officer of the Company
Co-Head of Global Business Unit
Senior Managing Executive Officer of SMBC |
April 1989 | Joined Mitsui Bank
| |||
| April 2017 | Executive Officer of the Company
| |||||
| Executive Officer of SMBC
| ||||||
| April 2020 | Managing Executive Officer of the Company
| |||||
| Managing Executive Officer of SMBC
| ||||||
| April 2023 | Senior Managing Corporate Executive Officer of the Company (to present)
| |||||
| Senior Managing Executive Officer of SMBC (to present)
| ||||||
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| Name |
Current positions and principal outside positions |
Business experience | ||||
| Akio Isowa |
Senior Managing Corporate Executive Officer of the Company
Group Chief Digital Innovation Officer, or CDIO
Officer in charge of Digital Solution Division, and Digital Strategy Department
Senior Managing Executive Officer of SMBC |
April 1990 | Joined Sumitomo Bank
| |||
| April 2019 | Executive Officer of the Company
| |||||
| Executive Officer of SMBC
| ||||||
| April 2021 | Retired as Executive Officer of the Company
| |||||
| April 2022 | Managing Executive Officer of the Company
| |||||
| Managing Executive Officer of SMBC
| ||||||
| April 2023 | Senior Managing Corporate Executive Officer of the Company (to present)
| |||||
| Senior Managing Executive Officer of SMBC (to present)
| ||||||
| Fumihiko Ito |
Senior Managing Corporate Executive Officer of the Company
Co-Head of Wholesale Business Unit
Senior Managing Executive Officer of SMBC |
April 1990 | Joined Sumitomo Bank
| |||
| April 2018 | Executive Officer of SMBC
| |||||
| October 2018 | Executive Officer of the Company
| |||||
| April 2020 | Managing Executive Officer of the Company
| |||||
| Managing Executive Officer of SMBC
| ||||||
| April 2023 | Senior Managing Corporate Executive Officer of the Company
| |||||
| Senior Managing Executive Officer of SMBC
| ||||||
| June 2023 | Director Senior Managing Corporate Executive Officer of the Company
| |||||
| March 2024 | Director and Senior Managing Executive Officer of SMBC
| |||||
| April 2025 | Senior Managing Corporate Executive Officer of the Company (to present)
| |||||
| Senior Managing Executive Officer of SMBC (to present)
| ||||||
| Takashi Kobayashi |
Senior Managing Corporate Executive Officer of the Company
Group Chief Human Resources Officer, or CHRO
Officer in charge of General Affairs Department, Human Resources Department, Quality Management Department and CRE & Facility Planning Department
Director and Senior Managing Executive Officer of SMBC |
April 1990 | Joined Mitsui Taiyo Kobe Bank
| |||
| April 2018 | Executive Officer of the Company
| |||||
| Executive Officer of SMBC
| ||||||
| April 2020 | Managing Executive Officer of the Company
| |||||
| Managing Executive Officer of SMBC
| ||||||
| March 2023 | Director and Managing Executive Officer of SMBC
| |||||
| April 2023 | Senior Managing Corporate Executive Officer of the Company (to present)
| |||||
| Director and Senior Managing Executive Officer of SMBC (to present)
| ||||||
| Natsuhiro Samejima |
Senior Managing Corporate Executive Officer of the Company
Group Chief Risk Officer, or CRO
Officer in charge of Corporate Risk Management Department, Risk Management Information Department, Risk Management Department, Americas Division and Credit & Investment Planning Department
Director and Senior Managing Executive Officer of SMBC |
April 1991 | Joined Sumitomo Bank
| |||
| April 2019 | Executive Officer of the Company
| |||||
| Executive Officer of SMBC
| ||||||
| April 2022 | Managing Executive Officer of the Company
| |||||
| Managing Executive Officer of SMBC
| ||||||
| March 2024 | Director and Managing Executive Officer of SMBC
| |||||
| April 2024 | Senior Managing Corporate Executive Officer of the Company (to present)
| |||||
| Director and Senior Managing Executive Officer of SMBC (to present)
| ||||||
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| Name |
Current positions and principal outside positions |
Business experience | ||||
| Hideki Takamatsu |
Senior Managing Corporate Executive Officer of the Company |
April 1991 | Joined Sumitomo Bank
| |||
|
Group Chief Information Officer, or CIO and Group Chief Data and Analytics Officer, or CDAO
Officer in charge of IT Planning Department, Cybersecurity Management Department, Data Management Department and Operations Planning Department
Director and Senior Managing Executive Officer of SMBC
|
April 2020 | Executive Officer of the Company
| ||||
| Executive Officer of SMBC
| ||||||
| April 2024 | Managing Executive Officer of the Company
| |||||
| Managing Executive Officer of SMBC
| ||||||
| April 2025 | Senior Managing Corporate Executive Officer of the Company (to present)
| |||||
| Director and Senior Managing Executive Officer of SMBC (to present)
| ||||||
| Yukihiro Mabuchi |
Senior Managing Corporate Executive Officer of the Company
Co-Head of Wholesale Business Unit
Senior Managing Executive Officer of SMBC |
April 1991 | Joined Sumitomo Bank
| |||
| April 2019 | Executive Officer of the Company
| |||||
| Executive Officer of SMBC
| ||||||
| April 2022 | Managing Executive Officer of the Company
| |||||
| Managing Executive Officer of SMBC
| ||||||
| April 2024 | Senior Managing Executive Officer of the Company
| |||||
| Senior Managing Executive Officer of SMBC (to present)
| ||||||
| April 2025 | Senior Managing Corporate Executive Officer of the Company (to present)
| |||||
| Akio Uemura |
Senior Managing Corporate Executive Officer of the Company
Head of Retail Business Unit
Senior Managing Executive Officer of SMBC |
April 1992 | Joined Sumitomo Bank
| |||
| April 2020 | Executive Officer of the Company
| |||||
| Executive Officer of SMBC
| ||||||
| April 2023 | Managing Executive Officer of the Company
| |||||
| Managing Executive Officer of SMBC
| ||||||
| April 2025 | Senior Managing Corporate Executive Officer of the Company (to present)
| |||||
| Senior Managing Executive Officer of SMBC (to present)
| ||||||
| Kazuyuki Anchi
|
See “Directors” under this Item 6.A. |
See “Directors” under this Item 6.A.
| ||||
| Arihiro Nagata |
Senior Managing Corporate Executive Officer of the Company
Head of Global Markets Business Unit
Senior Managing Executive Officer of SMBC |
April 1993 | Joined Sumitomo Bank
| |||
| April 2019 | General Manager of Global Investment Department of SMBC
| |||||
| April 2021 | Executive Officer of SMBC
| |||||
| April 2022 | Executive Officer of the Company
| |||||
| April 2023 | Managing Executive Officer of the Company
| |||||
| Managing Executive Officer of SMBC
| ||||||
| April 2025 | Senior Managing Corporate Executive Officer of the Company (to present)
| |||||
| Senior Managing Executive Officer of SMBC (to present)
| ||||||
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Familial Relationships
There are no familial relationships between any of the directors and corporate executive officers listed above.
Arrangements and Understandings
There is no arrangement or understanding with any major shareholder, customer, supplier or other party, pursuant to which any of the directors and corporate executive officers listed above were selected as a director or member of corporate executive officers.
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6.B. COMPENSATION
The aggregate amounts of compensation paid by us during the fiscal year ended March 31, 2025 to our directors and to our corporate executive officers were ¥537 million and ¥1,527 million, respectively.
The following table sets forth the details of individual compensation, disclosed pursuant to the provision of the Financial Instruments and Exchange Act of Japan (“FIEA”) and related ordinance, by SMFG and its subsidiaries in amounts equal to or exceeding ¥100 million during the fiscal year ended March 31, 2025:
| Compensation | ||||||||||||||||||||||
| Aggregated amount |
Paid by | Monetary compensation | Non-monetary compensation | |||||||||||||||||||
| Non-performance -linked |
Performance-linked | Non-performance -linked |
||||||||||||||||||||
| Directors and corporate executive officers |
Annual salary | Bonus | Stock compensation Plan I, PlanII |
Stock compensation Plan III |
||||||||||||||||||
| (In millions)(1) | ||||||||||||||||||||||
| Takeshi Kunibe |
¥ | 200 | SMFG | ¥ | 107 | ¥ | 31 | ¥ | 61 | ¥ | — | |||||||||||
| SMBC | — | — | — | — | ||||||||||||||||||
| Toru Nakashima |
¥ | 267 | SMFG | ¥ | 117 | ¥ | 48 | ¥ | 101 | ¥ | — | |||||||||||
| SMBC | — | — | — | — | ||||||||||||||||||
| Akihiro Fukutome |
¥ | 256 | SMFG | ¥ | 5 | ¥ | — | ¥ | — | ¥ | — | |||||||||||
| SMBC | 109 | 44 | 97 | — | ||||||||||||||||||
| Muneo Kanamaru |
¥ | 120 | SMFG | ¥ | 29 | ¥ | 11 | ¥ | 19 | ¥ | — | |||||||||||
| SMBC | 29 | 11 | 19 | — | ||||||||||||||||||
| Teiko Kudo |
¥ | 118 | SMFG | ¥ | 29 | ¥ | 10 | ¥ | 18 | ¥ | — | |||||||||||
| SMBC | 29 | 10 | 19 | — | ||||||||||||||||||
| Masamichi Koike |
¥ | 120 | SMFG | ¥ | 29 | ¥ | 11 | ¥ | 19 | ¥ | — | |||||||||||
| SMBC | 29 | 11 | 19 | — | ||||||||||||||||||
| Keiichiro Nakamura |
¥ | 101 | SMFG | ¥ | 23 | ¥ | 8 | ¥ | 15 | ¥ | — | |||||||||||
| SMBC | 24 | 8 | 15 | 4 | ||||||||||||||||||
| Akio Isowa |
¥ | 100 | SMFG | ¥ | 23 | ¥ | 8 | ¥ | 15 | ¥ | — | |||||||||||
| SMBC | 24 | 8 | 15 | 4 | ||||||||||||||||||
| Fumihiko Ito |
¥ | 100 | SMFG | ¥ | 23 | ¥ | 8 | ¥ | 15 | ¥ | — | |||||||||||
| SMBC | 24 | 8 | 15 | 4 | ||||||||||||||||||
| Takashi Kobayashi |
¥ | 100 | SMFG | ¥ | 23 | ¥ | 8 | ¥ | 15 | ¥ | — | |||||||||||
| SMBC | 23 | 8 | 15 | 4 | ||||||||||||||||||
| Natsuhiro Samejima |
¥ | 110 | SMFG | ¥ | 23 | ¥ | 8 | ¥ | 14 | ¥ | — | |||||||||||
| SMBC | 23 | 9 | 15 | 14 | ||||||||||||||||||
| (1) | Amounts less than one million yen have been truncated. |
In June 2017, we transitioned from a board of corporate auditors governance system to a company with three statutory committees: a nominating committee, an audit committee and a compensation committee. The compensation committee is responsible for establishing policy in regard to the determination of compensation of our directors and corporate executive officers. In addition, the committee determines the contents of the compensation of the individual directors and corporate executive officers in accordance with this policy. For further information, refer to “Item 6.C. Board Practices.”
In July 2017, our compensation committee resolved to revise our executive compensation policy and to introduce new stock compensation plans that utilize restricted stock, while discontinuing the issuance of new stock options. The plans allot shares of restricted stock to directors (excluding outside directors), corporate executive officers, and executive officers, etc. of SMFG, directors (excluding outside directors) and executive officers, etc. of SMBC and representative corporate executive officers of certain of our subsidiaries, in order to (a) provide more appropriate incentives for executives by strengthening linkages with SMFG’s short-, medium-
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and long-term performance, and (b) further align the interests of executives with those of shareholders, increase the weight of stock compensation, and enhance the shareholding of our executives.
Prior to the revision of our executive compensation policy discussed above, we had introduced compensation-type stock options to directors, corporate auditors, and executive officers of SMFG and SMBC (“SMFG Stock Acquisition Rights”), which served as an incentive for them to further contribute to the equity appreciation and achieve better corporate performance through sharing the benefits and risks of the share price performance with our shareholders.
For further information about compensation plans utilizing restricted stock and stock option plans, refer to “Item 6.E. Share Ownership” or Note 41 “Share-Based Payment” to our consolidated financial statements included elsewhere in this annual report.
6.C. BOARD PRACTICES
General
The Companies Act permits three types of governance systems for large public companies. The first system is for companies with a board of corporate auditors, and the second one is for companies with an audit and supervisory committee. The last one is for companies with three statutory committees: a nominating committee, an audit committee and a compensation committee.
We had previously employed a board of corporate auditors governance system. In order to further enhance our solid corporate governance system, we transitioned to a company with three statutory committees in June, 2017.
Under the Companies Act, a company with three statutory committees is required to have a nominating committee, an audit committee and a compensation committee, each of which consists of members of the board of directors and of which the majority of the members must be outside directors. In addition to the three statutory committees, we have voluntarily established our risk committee and sustainability committee.
“Outside director” means a director of any corporation who satisfies all of the following requirements: (a) a person who is not an executive director, corporate executive officer (shikkoyaku), or an employee, including a manager (“Executive Director, etc.”), and has not been an Executive Director, etc. of such corporation or any of its subsidiaries for the ten years prior to assuming his/her office; (b) if the person has been a director, accounting advisor or corporate auditor of such corporation or any of its subsidiaries (excluding a person who has been an Executive Director, etc.) at any time within the ten years prior to assuming his/her office, a person who has not been an Executive Director, etc. of such corporation or any of its subsidiaries for the ten years prior to assuming his/her office as director, accounting advisor, or corporate auditor; (c) a person who is not a parent corporation or any entity which is prescribed by the applicable Ordinance of the Ministry of Justice as a person who controls the management of the corporation (excluding entities who are juridical persons) (“parent corporation, etc.”) of such corporation (limited to a natural person) or director or corporate executive officer (shikkoyaku), or other employee, including a manager, of a parent corporation, etc.; (d) a person who is not an Executive Director, etc. of a subsidiary or any entity which is prescribed by the applicable Ordinance of the Ministry of Justice as the juridical person for which management is controlled by the person other than the corporation (“subsidiary, etc.”) of a parent corporation, etc. of such corporation; and (e) a person who is not a spouse or relative within the second degree of kinship of a director or corporate executive officer (shikkoyaku), manager, or other important employee of such corporation, or its parent corporation, etc. (limited to a natural person).
To ensure the compliance of our execution of our business operations with legal regulations and generally accepted practices, the outside directors are selected from among experts (including certified public accountants, lawyers and persons with consulting or business management experience).
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Also, under the Companies Act, a company with three statutory committees must have one or more corporate executive officers elected by resolution of the board of directors. Corporate executive officers decide on the execution of the operations of the company that were delegated to them by resolution of the board of directors.
Pursuant to Article 4 of our articles of incorporation, we maintain a corporate governance system consisting of a general meeting of shareholders, individual directors, a board of directors, a nominating committee, an audit committee, a compensation committee, corporate executive officers and an accounting auditor as its primary components.
Board of directors
Our articles of incorporation provide for a board of directors consisting of not fewer than three directors. We currently have thirteen directors. All directors are elected by our shareholders at a general meeting of shareholders. The term of office of a director expires upon conclusion of the ordinary general meeting of shareholders to be held for the last fiscal year ending within one year after the election of the director. Directors may serve any number of consecutive terms.
By resolution, our board of directors elects or removes corporate executive officers and representative corporate executive officers. Our board of directors may elect directors with titles (yakutsuki-torishimariyaku) and corporate executive officers with titles (yakutsuki-shikkoyaku) and assign or change the designation of the duties of corporate executive officers by resolution. In addition, our board of directors elects or removes members of each statutory committee.
The Companies Act requires the board of directors to decide on the execution of operations of a company, including basic management policy, and supervise the execution of duties by corporate executive officers. In addition, the board of directors may, by resolution of the same, delegate decisions on the execution of the operations to corporate executive officers, to the extent permitted by the Companies Act.
Our board of directors held 12 meetings during the fiscal year ended March 31, 2025. The average attendance rate was 99%.
Nominating committee
The nominating committee determines the contents of proposals regarding the election and dismissal of directors to be submitted to a general meeting of shareholders. The committee also deliberates on matters regarding personnel decisions pertaining to officers of the Company and our major subsidiaries and the selection of successors to the presidents of the Company, SMBC and SMBC Nikko Securities.
Under the Companies Act, we are required to have a nominating committee that consists of members of our board of directors, and the majority of the members must be outside directors. Currently, the chairman of the nominating committee is Jun Sawada, who is an outside director. Other outside directors on the nominating committee are Sonosuke Kadonaga and Norimitsu Takashima. The other director on the nominating committee is Makoto Takashima, the chairman of the board.
Our nominating committee held 4 meetings during the fiscal year ended March 31, 2025. The average attendance rate was 100%.
Audit committee
The audit committee is responsible for auditing the execution of duties by corporate executive officers and directors, preparing audit reports and determining the contents of proposals regarding the election or dismissal of, or refusal to reelect, accounting auditors under the Companies Act to be submitted to a general meeting of shareholders. In addition, the committee inspects our operations and assets, and those of our major subsidiaries.
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Under the Companies Act, we are required to have an audit committee that consists of members of our board of directors, and the majority of the members must be outside directors. Currently, the chairman of the audit committee is Sonosuke Kadonaga, who is an outside director. Other outside directors on the audit committee are Yoriko Goto and Charles D. Lake II. Other directors on the audit committee are Toshihiro Isshiki and Honami Matsugasaki.
Our audit committee held 14 meetings during the fiscal year ended March 31, 2025. The average attendance rate was 99%.
Compensation committee
The compensation committee is responsible for establishing policy in regard to the determination of compensation of our directors and corporate executive officers. In addition, the committee determines the contents of the compensation of the individual directors and corporate executive officers in accordance with this policy. The committee also deliberates on the policies for determining the compensation of directors and officers of our major subsidiaries, and the contents of compensation of individual executive officers of the Company.
Under the Companies Act, we are required to have a compensation committee that consists of members of our board of directors, and the majority of the members must be outside directors. Currently, the chairman of the compensation committee is Isao Teshirogi, who is an outside director. Other outside directors on the compensation committee are Jun Sawada, Norimitsu Takashima and Jenifer Rogers. Other directors on the compensation committee are Makoto Takashima, the chairman of the board, and Toru Nakashima, our president.
Our compensation committee held 7 meetings during the fiscal year ended March 31, 2025. The average attendance rate was 100%.
Risk committee
The risk committee, which we have voluntarily established, is responsible for matters relating to environmental and risk awareness, the operation of our Risk Appetite Framework, and the implementation of risk management systems as well as other important matters pertaining to risk management and reporting to the board of directors on these matters.
Sustainability committee
The sustainability committee, which we have voluntarily established, deliberates with and gives advice to the board of directors on the progress of the sustainability initiatives of the SMBC Group, domestic and overseas sustainability trends, and other matters related to sustainability.
Corporate executive officers
Under the Companies Act, a company with three statutory committees must have one or more corporate executive officers. We currently have fourteen corporate executive officers. All corporate executive officers are elected by our directors at a board of directors meeting. The term of office of a corporate executive officer expires upon conclusion of the first board of directors meeting called after conclusion of the ordinary general meeting of shareholders for the last business year ending within one year from the time of their election. The board of directors shall appoint representative corporate executive officers from among the corporate executive officers.
Our President and Group CEO executes business affairs in accordance with resolutions adopted by the board of directors. Our deputy presidents and corporate executive officers, senior managing corporate executive officers and managing corporate executive officers assist the President and Group CEO in the management of our day-to-day operations. Our chairman of the board serves as the chairman of and presides over our board of directors. This is done in order to separate the role of our president, whose responsibility is to exercise overall supervision of our business activities and SMBC Group companies, from the role of our chairman.
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At the operational level, we have created the Management Committee to act as the top decision-making body with respect to business administration and management supervision of the entire SMBC Group. The committee is chaired by the President and Group CEO with other members including our corporate executive officers and other officers designated by the President and Group CEO. The President and Group CEO considers important matters relating to the execution of business in accordance with the basic policies set by the board of directors and based on discussions held by the committee members.
Corporate Governance Practices
For the purpose of protecting the interests of shareholders in general, some Japanese securities exchanges, including the Tokyo Stock Exchange, requires a listed company to have, from amongst its outside directors or outside corporate auditors, at least one independent director or corporate auditor who does not have conflicting interests with shareholders as specified under the rule. All companies on these securities exchanges are required to report the name of such independent director or corporate auditor, which is disclosed to the public. In addition, the Japan’s Corporate Governance Code (“Corporate Governance Code”) formulated by the Tokyo Stock Exchange, which establishes fundamental principles for effective corporate governance at listed companies in Japan, provides that companies listed on the Prime Market should appoint at least one-third of their directors as independent directors and companies listed on other markets should appoint at least two independent directors. The independence standard for such independent directors will be determined by the subject listed company taking into consideration the independence standards of the Japanese stock exchanges. In consideration of the Corporate Governance Code, we also established the SMFG Corporate Governance Guideline which provides that more than half of the directors, and at least two of them, will be elected as independent outside directors. We designated all seven outside directors as independent directors.
Companies listed on the NYSE, must comply with certain corporate governance standards provided under Section 303A of the NYSE Listed Company Manual. However, NYSE-listed companies that are foreign private issuers, including us, are permitted to follow home country practices in lieu of certain provisions of Section 303A if such foreign private issuers meet certain criteria. Refer to “Item 16G. Corporate Governance” for a summary of significant ways in which our corporate governance practices differ from those required to be followed by NYSE-listed U.S. companies.
Exemption from Liability
Under the Companies Act and our articles of incorporation, we may exempt our non-executive directors, etc. from liabilities to us arising in connection with their failure to execute their duties, within the limits stipulated by applicable laws and regulations. Pursuant to such authority, we have entered into a liability limitation agreement with each outside director, etc. which limits the maximum amount of their liability to the Company arising in connection with a failure to execute their duties to the greater of either ¥10 million or the minimum liability amount prescribed in applicable laws.
Benefits upon Termination of Employment
Neither we nor our subsidiaries maintain any directors’ service contracts providing for benefits upon termination of employment.
6.D. EMPLOYEES
At March 31, 2025, 2024 and 2023, on a consolidated basis, we had approximately 123,000, 120,000 and 106,000 employees, respectively, including locally hired staff in our foreign offices but excluding temporary employees. We also had an average of approximately 9,000 temporary employees during the fiscal year ended March 31, 2025.
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The following tables show our full-time employees at March 31, 2025 on a consolidated basis under Japanese GAAP broken down based on business segment and geographical location:
| Percentage of full-time employees at March 31, 2025 |
||||
| Business segment: |
||||
| Wholesale Business Unit |
7 | % | ||
| Retail Business Unit |
22 | |||
| Global Business Unit |
57 | |||
| Global Markets Business Unit |
1 | |||
| Head office account and others |
13 | |||
|
|
|
|||
| Total |
100 | % | ||
|
|
|
|||
| Percentage of full-time employees at March 31, 2025 |
||||
| Location: |
||||
| Japan |
43 | % | ||
| Americas |
5 | |||
| Europe and Middle East |
3 | |||
| Asia and Oceania |
49 | |||
|
|
|
|||
| Total |
100 | % | ||
|
|
|
|||
Approximately half of our employees are members of workers’ unions, which negotiate with management concerning remuneration and working conditions. We consider our labor relations to be good.
We consider our level of remuneration, fringe benefits (including an employee share ownership program), working conditions and other allowances, which include lump-sum payments and annuities to employees upon retirement, to be generally competitive with those offered by other large enterprises in Japan.
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6.E. SHARE OWNERSHIP
Shareholdings by Directors and Senior Management
The following table shows the number of shares of our common stock owned by our directors and corporate executive officers at June 27, 2025:
| Number of shares owned(1) | ||||
| Directors and corporate executive officers: |
||||
| Makoto Takashima |
237,370 | |||
| Toru Nakashima |
162,130 | |||
| Teiko Kudo |
114,942 | |||
| Kazuyuki Anchi |
45,655 | |||
| Toshihiro Isshiki |
90,437 | |||
| Honami Matsugasaki |
36,927 | |||
| Sonosuke Kadonaga |
— | |||
| Jun Sawada |
— | |||
| Yoriko Goto |
— | |||
| Isao Teshirogi |
— | |||
| Norimitsu Takashima |
— | |||
| Charles D. Lake II |
600 | |||
| Jenifer Rogers |
1,100 | |||
| Yoshihiro Hyakutome |
108,112 | |||
| Takeshi Mikami |
127,356 | |||
| Keiichiro Nakamura |
100,107 | |||
| Akio Isowa |
81,691 | |||
| Fumihiko Ito |
89,632 | |||
| Takashi Kobayashi |
92,077 | |||
| Natsuhiro Samejima |
71,892 | |||
| Hideki Takamatsu |
51,560 | |||
| Yukihiro Mabuchi |
74,618 | |||
| Akio Uemura |
59,151 | |||
| Arihiro Nagata |
47,850 | |||
| (1) | Number of shares owned includes shares allotted under our compensation plans utilizing restricted stock. For further information, see “Stock Option Plans and Other Remuneration for Directors and Senior Management—Compensation Plans Utilizing Restricted Stock” in this section. |
None of our directors or corporate executive officers is the owner of more than one percent of our common stock, and no director or corporate executive officer has voting rights with respect to our common stock that are different from any other holder of our common stock.
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Stock Option Plans and Other Remuneration for Directors and Senior Management
Stock Option Plans
The following table provides an overview of the significant terms and conditions of the SMFG Stock Acquisition Rights, that we issued prior to the revision of our executive compensation policy in July 2017 (discussed below):
| Date of |
Number of grantees |
Shares granted(1) |
Exercise period |
Exercise price | ||||||
| SMFG Stock Acquisition Rights |
July 28, 2010 | 82 directors, corporate auditors and executive officers of SMFG and SMBC | 307,800 shares of common stock of the Company | August 13, 2010 to August 12, 2040 | ¥1 per share granted upon exercise of each stock acquisition right, multiplied by the number of shares granted | |||||
| SMFG Stock Acquisition Rights |
July 29, 2011 | 85 directors, corporate auditors and executive officers of SMFG and SMBC | 804,600 shares of common stock of the Company | August 16, 2011 to August 15, 2041 | ¥1 per share granted upon exercise of each stock acquisition right, multiplied by the number of shares granted | |||||
| SMFG Stock Acquisition Rights |
July 30, 2012 | 85 directors, corporate auditors and executive officers of SMFG and SMBC | 841,500 shares of common stock of the Company | August 15, 2012 to August 14, 2042 | ¥1 per share granted upon exercise of each stock acquisition right, multiplied by the number of shares granted | |||||
| SMFG Stock Acquisition Rights |
July 29, 2013 | 82 directors, corporate auditors and executive officers of SMFG and SMBC | 347,100 shares of common stock of the Company | August 14, 2013 to August 13, 2043 | ¥1 per share granted upon exercise of each stock acquisition right, multiplied by the number of shares granted | |||||
| SMFG Stock Acquisition Rights |
July 30, 2014 | 82 directors, corporate auditors and executive officers of SMFG and SMBC | 365,700 shares of common stock of the Company | August 15, 2014 to August 14, 2044 | ¥1 per share granted upon exercise of each stock acquisition right, multiplied by the number of shares granted | |||||
| SMFG Stock Acquisition Rights |
July 31, 2015 | 83 directors, corporate auditors and executive officers of SMFG and SMBC | 397,200 shares of common stock of the Company | August 18, 2015 to August 17, 2045 | ¥1 per share granted upon exercise of each stock acquisition right, multiplied by the number of shares granted | |||||
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| Date of |
Number of grantees |
Shares granted(1) |
Exercise period |
Exercise price | ||||||
| SMFG Stock Acquisition Rights |
July 26, 2016 | 89 directors, corporate auditors and executive officers of SMFG and SMBC | 603,600 shares of common stock of the Company | August 15, 2016 to August 14, 2046 | ¥1 per share granted upon exercise of each stock acquisition right, multiplied by the number of shares granted | |||||
| (1) | As resolved by the board of directors on May 15, 2024, we implemented a stock split of our common stock with an effective date of October 1, 2024, whereby each share of common stock owned by shareholders listed or recorded in the closing register of shareholders on the record date of September 30, 2024 was split into three shares. Number of shares granted took into account the stock split. |
Compensation Plans Utilizing Restricted Stock
In July 2017, our compensation committee resolved to revise our executive compensation policy and to introduce new stock compensation plans that utilize restricted stock, while discontinuing the issuance of new stock options.
The plans consist of Stock Compensation Plan I (“Plan I”), which determines remuneration primarily based on our medium-term performance, Stock Compensation Plan II (“Plan II”), which determines remuneration primarily based on our annual performance and Stock Compensation Plan III (“Plan III”), which determines remuneration primarily based on corporate title.
Plan I (medium-term performance share plan) has an evaluation period of three years, corresponding with our medium-term management plan. Executives are initially allotted shares of restricted stock equivalent to the monetary amount determined based on the executive’s corporate title. After the completion of the evaluation period, our compensation committee reviews the progress of our medium-term management plan, performance of our common stock, and results of customer satisfaction surveys and other factors, to determine a final amount to be released from transfer restrictions. Furthermore, we have incorporated quantitative indicators related to sustainability from the fiscal year ended March 31, 2024. In case the final amount falls below the initial amount, we retrieve all or part of the allotted shares at no cost.
Under Plan II (annual performance share plan), executives are allotted shares of restricted stock equivalent to a certain portion of the monetary amount determined based on the annual performance of SMFG, as well as on the individual performance of the executives reviewed both from short-term and medium-to-long-term perspectives. The remainder is paid to the executives as a cash bonus. Transfer restrictions on these shares are released evenly over the three-year period following the year of allotment. Furthermore, we have incorporated qualitative and quantitative indicators related to sustainability initiatives into executive compensation schemes to accelerate sustainability management from the fiscal year ended March 31, 2023.
Under Plan III (promotion reward plan), executives are allotted shares of restricted stock equivalent to pre-determined compensation amounts per title, reflecting the increased responsibilities derived from promotions. Restrictions shall apply to the shares until the earlier of 30 years from allotment or when the executive retires from office.
The eligible executives for the plans are directors (excluding outside directors), corporate executive officers and executive officers, etc. of SMFG, directors (excluding outside directors) and executive officers, etc. of SMBC and representative corporate executive officers of certain of our subsidiaries.
The allotment agreements that we enter into with executives under the plans restrict disposal of the allotted shares in any manner, including transfers of ownership or granting of security interest and, also provide that we may retrieve all or part of the allotted shares at no cost in case our compensation committee reaches certain
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decisions such as the non-achievement of financial targets. The agreements also include provisions for forfeiture and claw-back of vested stock in order to restrain excessive risk-taking and foster a prudent risk culture expected of a financial institution.
The following table provides details of the issuance and allotment of new shares under our stock compensation plans from April 1, 2022 to March 31, 2025:
| Date of issue |
Issue price(1) |
Class and total number of shares issued(1) |
Allottees and number of shares to be allotted(1) | |||
| July 26, 2022 |
¥1,335 per share | 987,276 shares of common stock of the Company | Directors of SMFG: 4 persons 23,952 shares
Corporate executive officers of SMFG: 15 persons 51,888 shares
Executive officers, etc. of SMFG: 38 persons 85,428 shares
Directors of SMFG’s subsidiaries: 15 persons 109,566 shares
Executive officers, etc. of SMFG’s subsidiaries: 113 persons 716,442 shares
| |||
| July 25, 2023 |
¥2,094 per share | 1,433,670 shares of common stock of the Company | Directors of SMFG: 5 persons 96,594 shares
Corporate executive officers of SMFG: 16 persons 102,789 shares
Executive officers, etc. of SMFG: 41 persons 136,434 shares
Directors of SMFG’s subsidiaries: 19 persons 210,438 shares
Executive officers, etc. of SMFG’s subsidiaries: 106 persons 887,415 shares
| |||
| July 25, 2024 |
¥3,748 per share | 1,025,706 shares of common stock of the Company | Directors of SMFG: 4 persons 54,237 shares
Corporate executive officers of SMFG: 13 persons 56,706 shares
Executive officers of SMFG: 45 persons 128,460 shares
Directors of SMFG’s subsidiaries: 23 persons 117,354 shares
Executive officers, etc. of SMFG’s subsidiaries: 188 persons 668,949 shares
|
| (1) | As resolved by the board of directors on May 15, 2024, we implemented a stock split of our common stock with an effective date of October 1, 2024, whereby each share of common stock owned by shareholders listed or recorded in the closing register of shareholders on the record date of September 30, 2024 was split into three shares. Issue price and number of shares are calculated based on the assumption that the stock split had been implemented at the beginning of the fiscal year ended March 31, 2023. |
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Employee Stock Ownership Associations
We have employee stock ownership associations in Japan for our and our subsidiaries’ employees. Members of the employee stock ownership associations set aside certain amounts from their monthly salary to purchase our common stock through the relevant employee stock ownership association. The administrator of each association makes open-market purchases of our common stock for the account of the association on a monthly basis. We and our subsidiaries contribute matching funds equivalent to 10% or 5% of the amount purchased by the relevant association. At March 31, 2025, none of the employee stock ownership associations held more than 1% of our common stock.
Employee Stock Ownership Plan
In March 2024, we announced the introduction of a share-based compensation plan for employees of SMBC. The plan is an incentive scheme that establishes an Employee Stock Ownership Plan (“ESOP”) trust which is funded by cash contributed by SMBC (via SMFG). The shares of our common stock acquired by the ESOP trust will be granted to SMBC employees upon their retirement based on the number of points earned by each employee. According to the rules of the share-based compensation plan for employees established by SMBC’s board of directors, the number of points granted to employees is linked to their grade and the business performance of SMFG. In this system, the compensation is linked to the SMFG share price over the medium-to-long-term, so that employees are incentivized to enhance the corporate value of the SMBC Group over the medium-to-long term. The plan was implemented for certain general managers in SMBC. On May 14, 2025, we announced that we added SMBC Nikko Securities Inc., Sumitomo Mitsui Card Company, Limited, and The Japan Research Institute, Limited, as subsidiaries eligible for the plan.
6.F. DISCLOSURE OF A REGISTRANT’S ACTION TO RECOVER ERRONEOUSLY AWARDED COMPENSATION
Not applicable.
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| Item 7. | Major Shareholders and Related Party Transactions |
7.A. MAJOR SHAREHOLDERS
Major Shareholders
Our major shareholders, appearing on our register of common shareholders at March 31, 2025, were as follows:
| Number of shares held(2) |
Percentage of shares issued(1)(2) |
|||||||
| Name: |
||||||||
| The Master Trust Bank of Japan, Ltd. (Trust Account) |
635,472,900 | 16.40 | % | |||||
| Custody Bank of Japan, Ltd. (Trust Account) |
221,036,100 | 5.70 | % | |||||
| STATE STREET BANK AND TRUST COMPANY 505001 |
106,052,661 | 2.73 | % | |||||
| STATE STREET BANK WEST CLIENT—TREATY 505234 |
77,562,181 | 2.00 | % | |||||
| NATSCUMCO |
73,125,966 | 1.88 | % | |||||
| JP MORGAN CHASE BANK 385781 |
52,795,679 | 1.36 | % | |||||
| GOVERNMENT OF NORWAY |
50,656,867 | 1.30 | % | |||||
| JPMorgan Securities Japan Co., Ltd. |
48,010,432 | 1.23 | % | |||||
| Barclays Securities Japan Limited |
44,065,000 | 1.13 | % | |||||
| The Nomura Trust and Banking Co., Ltd. (Trust Account) |
41,824,300 | 1.07 | % | |||||
| (1) | Percentages are calculated based on the total number of shares of common stock then issued, excluding our treasury stock, and have been truncated to the nearest second decimal point. |
| (2) | On February 5, 2024, Sumitomo Mitsui Trust Holdings, Inc. filed a Schedule 13G/A with the SEC, indicating that Sumitomo Mitsui Trust Holdings, Inc. and its subsidiaries beneficially held 74,480,400 shares of our common stock, representing 5.57% of our outstanding common stock at December 31, 2023. On February 5, 2024, BlackRock, Inc. filed a Schedule 13G/A with the SEC, indicating that BlackRock, Inc. and its subsidiaries beneficially held 99,768,992 shares of our common stock, representing 7.46% of our outstanding common stock at December 31, 2023. The numbers of shares in this footnote are the numbers before the stock split of our common stock we implemented with an effective date of October 1, 2024, whereby each share of common stock owned by shareholders listed or recorded in the closing register of shareholders on the record date of September 30, 2024 was split into three shares. |
Our major shareholders do not have different voting rights.
Shareholders in the United States
Because some of our common stock was held by brokers or other nominees, the number of shares held by and the number of beneficiary holders with addresses in the United States is not fully ascertainable. At March 31, 2025, there were 258 record holders of our common stock with addresses in the United States, whose shareholdings represented approximately 17% of our outstanding common stock on that date.
Control of the Company
To our knowledge, we are not directly or indirectly owned or controlled by any another corporation(s), by any foreign government or by any other natural or legal person(s), severally or jointly.
Arrangements for Change in Control of the Company
We know of no arrangements the operation of which may at a later time result in a change of control.
7.B. RELATED PARTY TRANSACTIONS
We and our banking subsidiaries had, and expect to have in the future, banking transactions and other transactions in the ordinary course of business with our related parties. For the fiscal year ended March 31, 2025, such transactions included, but were not limited to, loans, deposits and guarantees. Furthermore, such transactions were immaterial and were made at prevailing market rates, terms and conditions, and did not involve more than the normal risk of collectability or present other unfavorable features.
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During the fiscal year ended March 31, 2025, none of our directors or corporate executive officers, and none of the close members of their respective families, had any transactions that were material or any transactions that were unusual in their nature or conditions, involving goods, services or tangible or intangible assets, to which we were a party, and no such transactions were proposed at March 31, 2025. During the fiscal year ended March 31, 2025, we made no loans to our directors or corporate executive officers other than those that were made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and did not involve more than the normal risk of collectability or present other unfavorable features.
7.C. INTERESTS OF EXPERTS AND COUNSEL
Not applicable.
| Item 8. | Financial Information |
8.A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
Financial Statements
All relevant financial statements are attached hereto. Refer to “Item 18. Financial Statements.” See “Item 5.A. Operating Results—Reconciliation with Japanese GAAP” for a reconciliation of consolidated net profit and total equity for the fiscal year ended March 31, 2025 under IFRS, with those amounts under Japanese GAAP.
Export Sales
Not applicable.
Legal Proceedings
We are party to routine litigation incidental to our business, none of which is currently expected to have a material adverse effect on our financial condition or results of operations. However, there can be no assurance that an adverse decision in one or more of these lawsuits will not have a material adverse effect.
In addition, on February 13, 2023, our wholly-owned broker-dealer subsidiary, SMBC Nikko Securities, was convicted of certain violations under the Financial Instruments and Exchange Act in a proceeding before the Tokyo District Court. See “Item 3.D. Risk Factors—Risks Related to Our Business—Our business could be adversely affected by litigation and regulatory proceedings globally.”
Dividend Policy and Dividends
The declaration, payment and determination of any year-end dividend are subject to the approval of shareholders of our common stock at our general meeting of shareholders and to statutory restrictions. The declaration, payment and determination of the amount of any interim dividend require a resolution of our board of directors and are subject to statutory restrictions. Dividend payments are made to shareholders or pledgees of record at the record dates for each payment. March 31 is the record date for year-end dividends and September 30 is the record date for interim dividends. The payment of year-end and interim dividends on common stock is subject to prior payment of dividends on our preferred stock, if any.
We have a basic policy of enhancing shareholder value in a sustainable manner by balancing financial soundness, return to shareholders, and investment for growth. We adopt a progressive dividend policy, which does not reduce dividends and at least maintains or increases dividends each year, supported by our sustainable earnings growth, and aim to maintain a dividend payout ratio of 40% on a consolidated net profit basis under Japanese GAAP by the end of the current medium-term management plan.
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The following table shows historical aggregate dividend payments per share of our common stock for each of the fiscal years from the fiscal year ended March 31, 2023 through the fiscal year ended March 31, 2025:
| Dividend per share | ||||||||
| Paid(1)(3) | Declared(2)(3) | |||||||
| Fiscal year ended March 31, |
||||||||
| 2023 |
¥ | 80 | ¥ | 73 | ||||
| 2024 |
90 | 87 | ||||||
| 2025 |
122 | 105 | ||||||
| (1) | Dividend per share based on dividends in respect of each fiscal year including dividends proposed after current fiscal year-end but not recognized in the financial statements and excluding dividends in respect of the previous fiscal year declared in the current fiscal year. |
| (2) | Dividend per share based on dividends declared and recognized in the financial statements during each fiscal year. |
| (3) | As resolved by our board of directors on May 15, 2024, we implemented a stock split of our common stock with an effective date of October 1, 2024, whereby each share of common stock owned by shareholders listed or recorded in the closing register of shareholders on the record date of September 30, 2024 was split into three shares. The dividends per share are calculated based on the assumption that the stock split had been implemented at the beginning of the fiscal year ended March 31, 2023. |
8.B. SIGNIFICANT CHANGES
Except as otherwise described in this annual report, no significant change in our financial position has occurred since the date of the financial statements included elsewhere in this annual report.
| Item 9. | The Offer and Listing |
9.A. OFFER AND LISTING DETAILS
Offering Details
Not applicable.
Trading Markets for Our Shares
Refer to “Item 9.C. Markets” for information on the stock exchanges on which our common stock is listed.
9.B. PLAN OF DISTRIBUTION
Not applicable.
9.C. MARKETS
The primary trading market for our common stock is the Tokyo Stock Exchange (Prime Market), and our common stock is also listed on the Nagoya Stock Exchange (Premier Market). Our common stock is quoted under the Securities Code “8316.” Our common stock is not listed on any stock exchange outside of Japan.
Our ADSs have been listed on the NYSE since November 1, 2010 and are quoted under the ticker symbol “SMFG.”
9.D. SELLING SHAREHOLDERS
Not applicable.
9.E. DILUTION
Not applicable.
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9.F. EXPENSES OF THE ISSUE
Not applicable.
| Item 10. | Additional Information |
10.A. SHARE CAPITAL
Not applicable.
10.B. MEMORANDUM AND ARTICLES OF INCORPORATION
Set out below is information concerning our share capital, including a summary of provisions of our articles of incorporation and share handling regulations and of the Companies Act relating to joint stock corporations (kabushiki-kaisha) and related legislation, each as currently in effect.
Register and Entry, Objects and Purposes of the Company
The Company is a joint stock corporation (kabushiki-kaisha) incorporated in Japan under the Companies Act (kaishaho) of Japan. It is registered in the commercial register (shogyo-tokibo) maintained by the Chiyoda Branch Office of the Tokyo Bureau of Legal Affairs.
Article 2 of our articles of incorporation provides that our purpose is to engage in the following business activities:
| • | management of banks and other corporations which are permitted to become, or to be established as, subsidiaries under the Banking Act and any business incidental thereto; and |
| • | in addition to the businesses provided in the foregoing item, any business in which a bank holding company is permitted to engage under the Banking Act. |
Provisions Relating to Directors
We have adopted a company with three statutory committees system of corporate governance. The Companies Act requires the board of directors to decide on the execution of operations of a company, including basic management policy, and supervise the execution of duties by corporate executive officers. In addition, the board of directors may delegate decisions on the execution of the operations to corporate executive officers, to the extent permitted by the Companies Act. The Companies Act and our articles of incorporation, bylaws and associated internal rules issued pursuant to the articles provide in summary as follows:
| • | a director is not entitled to vote on a proposal or arrangement or contract in which the director has a special interest; |
| • | the amount of compensation to each of our directors is determined by the compensation committee, which consists of members of our board of directors, the majority of whom must be outside directors; |
| • | the board of directors has authority to approve transactions between the directors and us; |
| • | there are no provisions requiring the mandatory retirement of directors at a specified age; and |
| • | share ownership is not required in order to be eligible to serve as a director. |
Rights, Preferences and Restrictions of the Shares
A joint stock corporation is a legal entity incorporated under the Companies Act. The rights of shareholders of a joint stock corporation are represented by shares of stock in the corporation, and shareholders’ liability is limited to the amount of the subscription for the shares.
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We may issue shares within our authorized but unissued share capital following a resolution by our board of directors. An increase in our authorized share capital requires an amendment of our articles of incorporation, which generally requires approval of our common and preferred shareholders, if any.
Common Stock
General
Under the Act Concerning Book-Entry Transfer of Corporate Bonds, Shares and Other Securities (“Book-Entry Transfer Act”), the shares of all Japanese companies listed on any Japanese stock exchange, including our shares, are subject to a central clearing system of shares of Japanese listed companies.
Under the clearing system, a person must have an account at an account managing institution or at Japan Securities Depository Center, Inc. (“JASDEC”) in order to purchase, hold, sell or otherwise dispose of listed shares. Account managing institutions include financial instruments traders (i.e., securities companies), banks, trust companies and certain other financial institutions which meet the requirements prescribed by the Book-Entry Transfer Act, and only those financial institutions that meet further stringent requirements of the Book-Entry Transfer Act can open accounts directly at JASDEC. Under the Book-Entry Transfer Act, any transfer of shares is effected through book entry, and title to the shares passes to the transferee at the time when the transferred number of the shares is recorded in the transferee’s account at an account managing institution. The holder of an account at an account managing institution is presumed to be the legal owner of the shares held in such account.
Under the Companies Act and the Book-Entry Transfer Act, in order to assert shareholders’ rights against us, a shareholder’s name and address must be registered in our register of shareholders, except in limited circumstances. Under the clearing system, such registration is made upon our receipt of the necessary information from JASDEC. Nonresidents of Japan or non-Japanese corporations without a permanent establishment in Japan (“Nonresident Shareholders”) are required to appoint a standing proxy in Japan or provide a mailing address in Japan. Each Nonresident Shareholder must give notice of a standing proxy or a mailing address to the relevant account managing institution. That notice will be forwarded to us through JASDEC. Japanese securities companies and commercial banks customarily act as standing proxies and provide related services for standard fees. Notices from us to Nonresident Shareholders are delivered to standing proxies or their mailing addresses in Japan.
Our transfer agent is Sumitomo Mitsui Trust Bank, Limited.
Distributions of Surplus
As a holding company, we expect that most of our cash flow will come from dividends that SMBC pays us. Under some circumstances, various statutory or contractual provisions may restrict the dividends SMBC can pay us. For example, if SMBC does not have sufficient distributable amounts, it will be unable to pay dividends and we, in turn, may be unable to pay dividends on shares of our common stock. Therefore, our ability to pay dividends mainly depends on the financial performance of our principal operating subsidiary, SMBC.
Under the Companies Act, distribution of cash or other assets by a joint stock corporation to its shareholders, including dividends, takes the form of distributions of surplus (as described in “—Restriction on Distributions of Surplus”). We are permitted to make distributions of surplus to our shareholders any number of times per fiscal year, subject to limitations described in “—Restriction on Distributions of Surplus.” Distributions of surplus are required in principle to be authorized by a resolution of a general meeting of shareholders. Distributions of surplus are, however, permitted pursuant to a resolution of the board of directors if:
| (1) | our articles of incorporation so provide (our current articles of incorporation do not have a provision to that effect); |
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| (2) | the normal term of office of our directors is no longer than one year (our current articles of incorporation provide that the normal term of office of our directors expires upon the close of the general meeting of shareholders to be held for the last fiscal year ending within one year after the election); and |
| (3) | our nonconsolidated annual financial statements and certain documents for the latest fiscal year fairly present our assets and profit or loss, as required by an ordinance of the Ministry of Justice. |
In an exception to the above rule, even if the requirements described in (1) through (3) are not met, we are permitted to make distributions of surplus in cash to our shareholders by resolutions of the board of directors once per fiscal year if our articles of incorporation so provide. Our current articles of incorporation provide for distributions of surplus as interim dividends, the record date for which is September 30 of each year.
Distributions of surplus may be made in cash or in kind in proportion to the number of shares of common stock held by each shareholder. A resolution of a general meeting of shareholders or by the board of directors authorizing a distribution of surplus must specify the kind and aggregate book value of assets to be distributed, the manner of allocation of the assets to shareholders, and the effective date of the distribution. If a distribution of surplus is to be made in kind, we may, pursuant to a resolution of a general meeting of shareholders or by the board of directors, grant the right to our shareholders to require us to make the distribution in cash instead of in kind. If that right is not granted to shareholders, then the relevant distribution of surplus must be approved by a special resolution of a general meeting of shareholders.
Under our articles of incorporation, the record dates for annual dividends and interim dividends are March 31 and September 30, respectively, in each year. In Japan, both “ex-dividend” date (the date from which purchasers at shares through Japanese stock exchanges will not be entitled to the dividends to be paid to registered shareholders as any record date) and the record date for dividends precede the date of determination of the amount of the dividend to be paid. The ex-dividend date of the shares of common stock is generally the first business day prior to the record date. Under our articles of incorporation, we are not obligated to pay any distributions of surplus to be made in cash which have not been received after five years from the commencement date of those distributions.
Restriction on Distributions of Surplus
Payment of dividends on shares of common stock is also subject to the prior payment of dividends on shares of preferred stock, if any. In the event we pay an interim dividend on shares of our common stock, the interim dividend payment is also subject to the prior payment of interim dividends on the shares of preferred stock, if any.
When we make a distribution of surplus, we must set aside in our capital reserve or retained earnings reserve an amount equal to one-tenth of the amount of surplus so distributed as required by an ordinance of the Ministry of Justice.
The amount of surplus at any given time must be calculated in accordance with the following formula:
A + B + C + D – (E + F + G)
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In the above formula:
| “A” |
= | the total amount of other capital surplus and other retained earnings, each being the amount that appears on our nonconsolidated balance sheet as of the end of the last fiscal year; | ||
| “B” |
= | if we have disposed of treasury stock after the end of the last fiscal year, the amount of the consideration for that treasury stock received by us less the book value thereof; | ||
| “C” |
= | if we have reduced our stated capital after the end of the last fiscal year, the amount of that reduction less the portion thereof that has been transferred to capital reserve or retained earnings reserve, if any: | ||
| “D” |
= | if we have reduced our capital reserve or retained earnings reserve after the end of the last fiscal year, the amount of that reduction less the portion thereof that has been transferred to stated capital, if any: | ||
| “E” |
= | if we have cancelled treasury stock after the end of the last fiscal year, the book value of that treasury stock; | ||
| “F” |
= | if we have distributed surplus to our shareholders after the end of the last fiscal year, the total book value of the surplus so distributed; and | ||
| “G” |
= | other amounts set forth in an ordinance of the Ministry of Justice, including: | ||
| • | if we have reduced surplus and increased our stated capital, capital reserve or retained earnings reserve after the end of the last fiscal year, the amount of that reduction; and |
| • | if we have distributed surplus to shareholders after the end of the last fiscal year, the amount set aside in our capital reserve or retained earnings reserve, if any, as required by ordinances of the Ministry of Justice. |
The aggregate book value of surplus distributed by us may not exceed a prescribed distributable amount as calculated on the effective date of the distribution. Our prescribed distributable amount at any given time shall be the amount of surplus less the aggregate of (a) the book value of our treasury stock, (b) the amount of consideration for any treasury stock we disposed of after the end of the last fiscal year, (c) the sum of net unrealized losses on other securities and unrealized losses on land valuation, and (d) other amounts set forth in an ordinance of the Ministry of Justice, including (if the sum of one-half of our goodwill and deferred assets exceeds the total of the stated capital, capital reserve and retained earnings reserve, each being the amount in our nonconsolidated balance sheet at the end of the last fiscal year) all or a certain part of the exceeding amount as calculated in accordance with the ordinances of the Ministry of Justice. If we have prepared interim financial statements in accordance with the ordinances of the Ministry of Justice as described below, and if the interim financial statements have been approved by the board of directors or (if so required) by a general meeting of shareholders, then the prescribed distributable amount must be adjusted to take into account the amount of profit or loss, and the amount of consideration for any of our treasury stock disposed of by us, during the period for which the interim financial statements have been prepared. We will be permitted to prepare nonconsolidated interim financial statements consisting of a balance sheet at any date subsequent to the end of the last fiscal year and an income statement for the period from the first day of the current fiscal year to the date of the balance sheet. Interim financial statements so prepared by us must be audited by our audit committee and accounting auditors, as required by an ordinance of the Ministry of Justice.
Voting Rights
Holders of shares of common stock have one voting right for each unit of shares held by them. Except as otherwise provided by law or by our articles of incorporation, a resolution can be adopted at a general meeting of shareholders by the holder of a majority of the total number of the voting rights represented at the meeting. In our articles of incorporation, the quorum to elect directors is one-third of the total number of voting rights. Our shareholders are not entitled to cumulative voting in the election of directors. Our shareholders may cast their
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votes by mail or via the internet. Our shareholders may also exercise their voting rights through proxies, provided that the proxies are also holders of shares with voting rights.
The Companies Act provides that certain important matters shall be approved by a special resolution of a general meeting of shareholders. Under our articles of incorporation, the quorum for a special resolution is one-third of the total number of voting rights and the approval of at least two-thirds of the voting rights represented at the meeting is required for adopting a special resolution. Important matters include:
| • | amending the articles of incorporation (except for amendments that may be authorized by the board of directors under the Companies Act); |
| • | reducing stated capital which meets certain requirements, with some exceptions; |
| • | dissolving, merging or consolidating requiring shareholders’ approval; |
| • | establishing a parent and a wholly-owned subsidiary relationship by way of a share transfer (kabushiki-iten) or share exchange (kabushiki-kokan), or establishing of a parent and subsidiary relationship by way of a partial share exchange (kabushiki-kofu), requiring shareholders’ approval; |
| • | transferring the whole or a substantial part of our business; |
| • | transferring all or part of the shares of a subsidiary which meets certain requirements; |
| • | taking over the whole business of another company requiring shareholders’ approval; |
| • | corporate split requiring shareholders’ approval; |
| • | consolidating shares of common stock; |
| • | acquiring shares of common stock from a specific shareholder other than one of our subsidiaries; |
| • | issuing or transferring new shares or existing shares held by us as treasury stock to persons other than the shareholders at a specially favorable price; |
| • | issuing stock acquisition rights (including those incorporated in bonds with stock acquisition rights) to persons other than the shareholders under specially favorable conditions; |
| • | exempting some liability of a director or corporate executive officer; and |
| • | distributing surplus in-kind if shareholders are not granted the right to require us to make a distribution in cash instead of in-kind. |
Capital and Reserves
When we issue new shares, the amount of the cash or assets paid or contributed by subscribers for new shares (with some exceptions) is required to be accounted for as stated capital, although we may account for an amount not exceeding one-half of the cash or assets as capital reserve by resolutions of the board of directors.
We may reduce our capital reserve or retained earnings reserve generally by resolution of a general meeting of shareholders. We may account for the whole or any part of the reduction as stated capital if we so decide by the same resolution. On the other hand, we may reduce our stated capital generally by special resolution of a general meeting of shareholders and may account for the whole or any part of the reduction as capital reserve if we so decide by the same resolution. We may reduce our surplus and increase either (1) stated capital or (2) capital reserve and/or retained earnings reserve by the same amount, in either case by resolution of a general meeting of shareholders.
Stock Splits
We may at any time split our outstanding shares of common stock into a greater number of shares of common stock by resolution of the board of directors. When a stock split is to be made, so long as our only class of outstanding stock is the common stock, we may increase the number of authorized shares in the same ratio as
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that of the stock split by amending our articles of incorporation. We may effect such an amendment by resolution of the board of directors without shareholder approval.
We must give public notice of a stock split, specifying the record date therefore, not less than two weeks prior to the record date.
As resolved by our board of directors on May 15, 2024, we implemented a stock split of our common stock with an effective date of October 1, 2024, whereby each share of common stock owned by shareholders listed or recorded in the closing register of shareholders on the record date of September 30, 2024 was split into three shares. Our articles of incorporation were amended to increase the authorized share capital to cover the number of shares increased by the stock split, which amendment became effective simultaneously with the effectiveness of the stock split.
Unit Share System
We have a unit share system, under which 100 shares of our common stock constitute one unit. Under the unit share system, shareholders have one voting right for each unit of shares held by them at a general meeting of shareholders, and shares constituting a fractional unit carry no voting rights. Under our articles of incorporation, the holders of shares constituting a fractional unit do not have shareholder rights except for those specified in the Companies Act or an ordinance of the Ministry of Justice, which include the rights (1) to receive dividends, (2) to receive cash or other assets in case of consolidation or split of shares, share exchange or share transfer, or merger, or (3) to be allotted rights to subscribe for free new shares and stock acquisition rights when those rights are granted to shareholders. We may cease to use the unit share system by amendment to the articles of incorporation without shareholders’ approval even though amendments to the articles of incorporation generally require a special resolution of the general meeting of shareholders.
A holder of shares of our common stock constituting less than one unit may at any time request us to purchase those shares. In addition, a holder of shares of our common stock constituting less than one unit may at any time request us to sell to it the number of shares necessary to raise its share ownership to a whole unit. Under the clearing system operated by JASDEC, such request must be made through the financial institution where the shareholder has opened its account.
The price at which shares of our common stock constituting less than one unit will be purchased or sold by us pursuant to such request will be equal to either (a) the closing price of shares of our common stock reported by the Tokyo Stock Exchange on the day when such request is received by our transfer agent, or (b) if no sale takes place on the Tokyo Stock Exchange on that day, the price at which sale of such shares is executed on the Tokyo Stock Exchange immediately thereafter. Pursuant to our share handling regulations, an amount equal to the applicable brokerage commission will be deducted from the price so determined.
Under the new clearing system, shares constituting less than one unit are transferable. Under the rules of the Japanese stock exchanges, however, shares constituting less than one unit do not comprise a trading unit, except in limited circumstances, and accordingly, may not be sold on the Japanese stock exchanges.
Liquidation Rights
In the event of our liquidation, the assets remaining after payment of all debts, liquidation expenses, taxes and required distribution payments to preferred shareholders, if any, will be distributed among shareholders of common stock in proportion to the respective number of shares which they hold. For liquidation preference for residual assets to the holders of preferred stock, see “—Preferred Stock—Liquidation Rights.”
Redemption Provisions and Sinking Fund Provisions
Our common stock has no redemption provisions or sinking fund provisions.
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Liability to Further Calls or Assessments
Our shares of common stock outstanding, including shares represented by the ADSs, are fully paid and nonassessable.
Legal Restrictions on Acquisitions of Shares
The FIEA and its related regulations require any person who has become solely or jointly a beneficial holder of more than 5% of the total issued shares of capital stock of a company listed on any Japanese stock exchange, to file with the director of an appropriate local finance bureau of the Ministry of Finance within five business days a report concerning the shareholdings. With some exceptions, a similar report must also be filed in respect of any subsequent change of 1% or more in those holdings or any change in material matters set out in reports previously filed. For this purpose, shares issuable to a holder upon conversion of convertible securities or exercise of share subscription warrants or stock acquisition rights are taken into account in determining both the number of shares held by such holder and the issuer’s total issued share capital. Copies of each report must also be furnished to all the Japanese stock exchanges on which the shares are listed.
Under the Banking Act, a person who desires to hold 20% (in some exceptional cases, 15%) or more of the voting rights of a bank is required to obtain advance approval of the FSA Commissioner. In addition, any person who becomes a holder of more than 5% of the voting rights of a bank holding company or a bank must report the ownership of the voting rights to the director of an appropriate local finance bureau within five business days. This requirement is separate from the significant shareholdings report required under the FIEA. See “Item 4.B. Business Overview—Regulations in Japan—Regulations for Stabilizing the Financial System—Examination and Reporting Applicable to Shareholders of a Bank.”
Subscription Rights
Holders of shares of our common stock have no preemptive rights. Authorized but unissued shares of common stock may be issued at the times, and upon the terms the board of directors determines, subject to the limitations as to the issuance of new shares of common stock at a specially favorable price mentioned in “—Voting Rights” above. The board of directors may, however, determine that the holders of shares of common stock be given subscription rights to new shares of common stock, in which case they must be given on uniform terms to all holders of shares of common stock at a record date of which not less than two weeks’ prior public notice must be given. Each of the shareholders to whom subscription rights is given must also be given at least two weeks’ prior notice of the date on which the rights expire.
Stock Acquisition Rights
We may issue stock acquisition rights (shinkabu-yoyakuken). Holders of stock acquisition rights are entitled to acquire shares from us upon payment of the applicable exercise price and subject to other terms and conditions thereof. We may also issue bonds with stock acquisition rights (shinkabu-yoyakuken-tsuki-shasai). The issuance of stock acquisition rights and bonds with stock acquisition rights may be authorized by the board of directors unless it is made under specially favorable conditions, as described in “—Voting Rights.”
Record Date
March 31 is the record date for the payment of year-end dividends and the determination of shareholders entitled to vote at the ordinary general meeting of shareholders. September 30 is the record date for payment of interim dividends. In addition, by determination by corporate executive officers under the authority delegated by the board of directors and after giving at least two weeks’ prior public notice, we may at any time set a record date in order to determine the shareholders who are entitled to certain rights pertaining to the common stock.
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Under the Book-Entry Transfer Act, we are required to give notice of each record date to the JASDEC at least two weeks prior to such record date. The JASDEC is required to give us notice of the names and addresses of our shareholders, the numbers of shares held by them, and other relevant information at a record date promptly after we set it.
Our Acquisition of Our Own Shares of Common Stock
We may acquire shares of our common stock (1) by way of purchase on any Japanese stock exchange on which shares of our common stock are listed, or by way of a tender offer (in either case, pursuant to an ordinary resolution of a general meeting of shareholders or a resolution of the board of directors), (2) from a specific shareholder other than any of our subsidiaries (pursuant to a special resolution of a general meeting of shareholders), or (3) from any of our subsidiaries (pursuant to a resolution of the board of directors). In the case of (2) above, any other shareholder may make a request to a director, at least five days prior to the relevant general meeting of shareholders, to include the shareholder as a seller in the proposed purchase. However, that right is not available if the purchase price or any other consideration to be received by the relevant specific shareholder does not exceed the then market price of the shares to be purchased from the shareholder.
The total amount of the purchase price of shares of common stock may not exceed the prescribed distributable amount, as described in “—Common Stock—Restriction on Distributions of Surplus.”
We may hold the shares of common stock acquired, and may generally dispose of or cancel those shares by resolution of the board of directors.
Disposal of Shares of Our Common Stock Held by Shareholders Whose Location Is Unknown
We are not required to send notices to a shareholder if notices have failed to arrive for five consecutive years or more at his or her address in our register of shareholders unless we are notified of a new address. If the shareholder also fails to receive distributions of surplus on the shares for five or more consecutive years at his or her address in our register of shareholders or otherwise as specified, then we may in general dispose of those shares at their then-market price and hold or deposit the proceeds of that disposal on behalf of that shareholder.
Preferred Stock
The following is a summary of information concerning provisions of our articles of incorporation.
General
At the date of this annual report, under our articles of incorporation, we are authorized to issue 167,000 shares of Type 5 preferred stock, 167,000 shares of Type 7 preferred stock, 115,000 shares of Type 8 preferred stock and 115,000 shares of Type 9 preferred stock. In June 2013, our articles of incorporation were amended to delete the provisions regarding Type 6 preferred stock, as these provisions have become unnecessary.
In March 2005, we issued 70,001 shares of our 1st series Type 6 preferred stock for an aggregate issue price of ¥210 billion. The Type 6 preferred stock was allocated using a third-party allocation of shares at a price of ¥3,000,000 per share, ¥1,500,000 of which was accounted for as stated capital. Sumitomo Life Insurance Company acquired 23,334 shares, Nippon Life Insurance Company acquired 20,000 shares, Taiju Life Insurance Company Limited acquired 16,667 shares and Mitsui Sumitomo Insurance Company, Limited acquired 10,000 shares. On April 1, 2011, we acquired and cancelled all of the outstanding 1st series Type 6 preferred stock.
At the date of this annual report, we have no preferred stock outstanding. The following is a summary of the relevant provisions of our articles of incorporation regarding preferred stock.
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Preferred Dividends
Our articles of incorporation provide that, if we pay dividends, we must pay cash dividends to holders of shares of our preferred stock in preference to the holders of our common stock. If preferred interim dividends stipulated in our articles of incorporation were paid during the relevant fiscal year, the amount of the preferred interim dividends shall be subtracted from the amount of annual preferred dividends.
Our failure to declare annual preferred dividends in full in respect of any fiscal year on a series of preferred stock gives the holders of that preferred stock certain voting rights.
Liquidation Rights
In the event of our voluntary or involuntary liquidation, holders of our preferred stock will be entitled, equally in rank as among themselves and in preference over shares of our common stock, to receive out of our residual assets upon liquidation a distribution of ¥3,000,000 per share.
Preferred stockholders are not entitled to any further dividends or other participation or distribution of our residual assets upon our liquidation.
Voting Rights
Our articles of incorporation provide that holders of preferred stock are only entitled to receive notice of, and to vote at, a general meeting of shareholders;
| • | from the commencement of our ordinary general meeting of shareholders if an agenda for approval to declare a preferred dividend is not submitted to the meeting; or |
| • | from the close of our ordinary general meeting of shareholders if a proposed resolution to declare a preferred dividend is not approved at the meeting. |
In both cases, these rights of our preferred stockholders lapse when a resolution of a general meeting of shareholders declaring a preferred dividend is approved.
The Companies Act provides that a separate resolution of a meeting of the holders of the preferred stock is required in order to approve certain matters which would prejudice their interests, including;
| • | amendments to the articles of incorporation to add new classes of shares to be issued, alter the terms of the shares or increase the number of shares or authorized number of any class of shares, with certain exceptions; |
| • | consolidations or splits of shares; |
| • | dividends of shares or stock acquisition rights to shareholders without any consideration; |
| • | grants of preemptive rights for new shares or stock acquisition rights; |
| • | amalgamations or mergers; |
| • | certain corporate splits; |
| • | share exchanges; |
| • | share transfers; and |
| • | other matters set forth in the articles of incorporation. |
Except for the amendments described above, the articles of incorporation may expressly permit certain of the above matters to be approved without a separate resolution. Our articles of incorporation do not include that express permission.
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Ranking
If issued, the outstanding shares of our preferred stock would rank pari passu with each other as to participation in our profits or assets, including dividends and distributions of residual assets upon our liquidation.
Unless holders of our preferred stock give approval, we may not create or issue any other shares ranking in priority in terms of the right to receive distributions of surplus or the right to receive distributions of residual assets or otherwise in priority to the preferred stock already issued. However, without obtaining the consent of holders of the preferred stock, we may issue other preferred stock ranking pari passu with the preferred stock already issued as to the order of participation in our profits or assets, carrying rights to preferred dividends, or terms of conversion that our board of directors may determine, subject to limitations set forth in our articles of incorporation and the Companies Act.
Purchase or Redemption of Preferred Stock
Subject to the requirements of the Companies Act, we may purchase out of our prescribed distributable amounts any shares of our preferred stock outstanding at any time and cancel that preferred stock. In June 2013, we amended our articles of incorporation in order to qualify our preferred stock for inclusion in our regulatory capital in accordance with the new FSA capital adequacy guidelines based on the Basel III framework. Under the amended articles of incorporation, we will acquire our outstanding preferred stock without consideration or in exchange for common stock if we become non-viable.
Mandatory Redemption Provisions and Sinking Fund Provisions
Our articles of incorporation do not provide any mandatory redemption provisions and sinking fund provisions.
Stock Splits
Our articles of incorporation provide that no stock split shall be made to the preferred stock unless otherwise provided for in any law or regulation.
Subscription Rights
Our articles of incorporation provide that we shall not grant holders of preferred stock any right to subscribe for new shares or stock acquisition rights.
Conditions to Change Shareholders’ Rights
Our articles of incorporation do not specify what actions or quorums are required to change the rights of holders of our stock.
General Meeting of Shareholders
Our ordinary general meeting of shareholders is held within three months after the end of each fiscal year. In addition, we may hold an extraordinary general meeting of shareholders whenever necessary. Notice of a general meeting of shareholders stating the place, the time and the purpose thereof, and certain matters set forth in the Companies Act and in ordinances of the Ministry of Justice, must be given to each holder of shares of common stock with voting rights (or to the standing proxy or mailing address in Japan of a nonresident shareholder) at least two weeks prior to the date set for the meeting. The record date for an ordinary general meeting of shareholders is March 31 of each year.
Any shareholder or group of shareholders holding at least three percent of the total outstanding voting rights, for a continuous period of six months or longer, may require the convocation of a general meeting of shareholders for a particular purpose. Unless such a general meeting of shareholders is convened promptly, or a
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convocation notice of a meeting which is to be held not later than eight weeks from the day of such demand is dispatched, the requiring shareholders may, upon obtaining court approval, convene such general meeting of shareholders.
Any shareholder holding at least 300 voting rights or one percent of our total number of voting rights for six months or longer may propose a matter to be considered at a general meeting of shareholders, and request to include the proposal (the number of which may be limited to 10) in a notice of a general meeting of shareholders, by submitting a written request to a director at least eight weeks prior to the date of the meeting. Any of the minimum percentages, time periods and number of voting rights necessary for exercising the minority shareholder rights described above may be decreased or shortened if our articles of incorporation so provide. Our articles of incorporation currently do not include any of those provisions.
To attend a general meeting of shareholders in person or by proxy, shareholders must provide proof of identity upon request. Shareholders may appoint a proxy by a written power of attorney for the meeting. Such proxy must be one of our shareholders with voting rights.
Limitations on the Rights to Hold Our Common Stock by Foreign Investors
There are no specific limitations imposed by the laws of Japan, our articles of incorporation, or our other constituent documents, on the rights of nonresidents or foreign shareholders to hold or exercise voting rights on our shares of common stock or preferred stock. For further information, see “Common Stock—Voting Rights.”
Anti-Change in Control Provisions
There is no provision in our articles of incorporation that would have the effect of delaying, deferring or preventing a change in control of us, and that would operate only with respect to a merger, consolidation, acquisition or corporate restructuring involving us.
Provisions Governing Changes in the Company’s Capital
We have no conditions more stringent than are required by law imposed by our articles of incorporation governing changes in capital.
10.C. MATERIAL CONTRACTS
All contracts that we are currently a party to, or were a party to during our two most recently completed fiscal years up to the date of this annual report, were entered into in the ordinary course of business or were otherwise immaterial.
10.D. EXCHANGE CONTROLS
Japanese Foreign Exchange Regulations
The following is a general summary of major Japanese foreign exchange controls regulations applicable to holders of shares of our common stock or voting rights thereunder who are “Foreign investors,” as described below. The statements regarding Japanese foreign exchange controls regulations set forth below are based on the laws and regulations in force and as interpreted by the Japanese authorities as of the date of this registration statement and are subject to subsequent changes in the applicable Japanese laws or interpretations thereof. This summary is not exhaustive of all possible foreign exchange controls considerations that may apply to a particular investor, and potential investors are advised to satisfy themselves as to the overall foreign exchange controls consequences of the acquisition, ownership and disposition of shares of our common stock or voting rights thereunder by consulting their own advisors.
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The Foreign Exchange and Foreign Trade Act of Japan (the “FEFTA”) and the cabinet orders and ministerial ordinances, collectively known as the Foreign Exchange Act, set forth, among other things, the regulations relating to the receipt by nonresidents of Japan of payment with respect to our shares, and the acquisition and holding of our shares by nonresidents of Japan and foreign investors, both as defined below.
Nonresidents of Japan are individuals who are not residents in Japan and corporations whose principal offices are located outside Japan. Generally, branches and offices of nonresident corporations located in Japan are regarded as residents of Japan while the branches and offices of Japanese corporations located outside Japan are regarded as nonresidents of Japan.
“Foreign investors” are defined as:
| (i) | individuals not residing in Japan; |
| (ii) | corporations which are organized under the laws of foreign countries or whose principal offices are located outside Japan; |
| (iii) | corporations of which 50% or more of the voting rights are held, directly or indirectly, by individuals not residing in Japan and/or corporations which are organized under the laws of foreign countries or whose principal offices are located outside Japan; and |
| (iv) | partnerships under the Civil Code of Japan (Act No. 89 of 1896, as amended) established to invest in corporations, limited partnerships for investment under the Limited Partnership Act for Investment of Japan (Act No. 90 of 1998, as amended), or any other similar partnerships under foreign law, of which (a) 50% or more of the total contributions are made by individuals and/or corporations falling within (i), (ii), (iii) above and/or (v) below or any other persons prescribed under the Foreign Exchange Act or (b) a majority of the general partners are individuals and/or corporations falling within (i), (ii), (iii) above and/or (v) below or any other persons prescribed under the Foreign Exchange Act; and |
| (v) | corporations, a majority of officers (or a majority of officers having the power of representation) of which are individuals not residing in Japan. |
Acquisition of Shares
In general, a nonresident who acquires our shares from a resident of Japan is not subject to any prior filing requirement, although the Foreign Exchange Act authorizes the Minister of Finance of Japan and the Ministers responsible for the business to require a prior submission for any such acquisition in certain limited circumstances.
Except for the general limitation under Japanese antitrust and antimonopoly regulations against shareholdings in the capital stock of a Japanese corporation, which lead or may lead to a restraint of trade or monopoly, and general limitations under the Companies Act or our articles of incorporation on the rights of shareholders applicable, regardless of residence or nationality, there is no limitation under Japanese law and regulations applicable to us, or under our articles of incorporation on the rights of nonresident or foreign shareholders to hold or exercise voting rights on our shares.
Inward Direct Investment in Shares of Listed Companies
Definition of Inward Direct Investment
If a foreign investor acquires shares or voting rights of a Japanese company that is listed on a Japanese stock exchange and, as a result of the acquisition, the foreign investor, in combination with any existing holdings, directly or indirectly holds 1% or more of the issued shares or the total number of voting rights of the relevant company, such acquisition constitutes an “inward direct investment.” In addition, acquisition of the authority to exercise, or instruct to exercise, voting rights held by other shareholders that results in the foreign investor, in
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combination with any existing shareholding, directly or indirectly holding 1% or more of the total number of voting rights of the relevant company, constitutes an “inward direct investment.”
In addition to the acquisitions of shares or voting rights described above, if a foreign investor (i) is granted the authority to exercise proxy voting rights on behalf of other shareholders of the relevant company regarding certain matters which may control substantially or have material influence on the management of such company such as the election or removal of directors or (ii) obtains consent from another foreign investor holding the voting rights of the relevant company to exercise the voting rights of such company jointly, and, in each case, as a result of these arrangements, the number of the voting rights directly or indirectly held by the foreign investor, including the total number of the voting rights subject to such proxy, or the sum of the number of the voting rights directly or indirectly held by the foreign investor and such other foreign investors subject to such joint voting agreement, as the case may be, is 10% or more of the total number of voting rights of the relevant company, each such arrangement regarding voting rights (“voting arrangement”) constitutes an “inward direct investment.” Additionally, if a foreign investor who directly or indirectly holds 1% or more of the total voting rights of a Japanese listed company, at the general meeting of shareholders, consents to certain proposals having material influence on the management of such company such as (i) election of such foreign investor or its related persons (as defined in the Foreign Exchange Act) as directors or corporate auditors of the relevant company or (ii) transfer or discontinuation of its business, such consent will also constitute an “inward direct investment.”
Prior Notification Requirements
If a foreign investor intends to consummate an acquisition of shares or voting rights of a Japanese listed company that constitutes an “inward direct investment” as described above, in certain circumstances, such as where the foreign investor is in a country that is not listed on an exemption schedule in the Foreign Exchange Act or where that Japanese company is engaged in certain businesses designated by the Foreign Exchange Act as designated businesses (the “Designated Businesses”), prior notification of the relevant inward direct investment must be filed with the Minister of Finance and any other competent Ministers.
However, a foreign investor seeking to acquire shares or voting rights of a Japanese listed company or the authority to exercise, either directly or through instructions, voting rights held by other shareholders that constitutes an “inward direct investment” may be generally eligible for the exemptions from the prior notification requirements, if certain conditions (as prescribed in the Foreign Exchange Act) are met.
In the case of an acquisition of shares or voting rights or the authority to exercise, voting rights of a Japanese listed company that is engaged in the certain Designated Businesses designated by the Foreign Exchange Act as core sector businesses (the “Core Sector Designated Businesses”), which are currently engaged by the Company, the foreign investor may be exempted from the prior notification requirement, if, as a result of such acquisition, the foreign investor directly or indirectly holds less than 10% of the total number of issued shares or voting rights of the relevant company, and such foreign investor complies with the following conditions:
| (i) | the foreign investor or its closely-related persons (as defined in the Foreign Exchange Act) will not become directors or corporate auditors of the relevant company; |
| (ii) | the foreign investor will not make certain proposals (as prescribed in the Foreign Exchange Act) at the general meeting of shareholders, including transfer or discontinuation of the Designated Businesses of the relevant company; |
| (iii) | the foreign investor will not access non-public technical information in relation to the Designated Businesses of the relevant company, or take certain other actions that may lead to the leak of such non-public technical information (as prescribed in the Foreign Exchange Act); |
| (iv) | the foreign investor will not attend, or not cause any persons designated by it to attend, meetings of the relevant company’s board of directors, or meetings of committees having authority to make important decisions, in respect of the Core Sector Designated Businesses of the relevant company; and |
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| (v) | the foreign investor will not make, or not cause any persons designated by it to make, proposals to such board or committees or their members in writing or electronic form requesting any response or actions by certain deadlines in respect of the Core Sector Designated Businesses of the relevant company. |
Notwithstanding the above, if a foreign investor falls under the category of disqualified investors designated by the Foreign Exchange Act (including (a) investors who have records of certain sanctions due to violations of the FEFTA, (b) foreign governments, etc. (as prescribed in the Foreign Exchange Act) and (c) certain investors who are owned by or have certain other relationships with, foreign governments, etc., excluding those who are accredited by the Minister of Finance), in no event may such foreign investor be eligible for the exemptions described above. On the other hand, if a foreign investor, excluding the disqualified investors described in the foregoing sentence, falls under a category of certain foreign financial institutions (as prescribed in the Foreign Exchange Act) and complies with the conditions for the exemption (i) through (iii) above, such foreign investor may be eligible for the exemptions, even if the acquisition results in such foreign investor’s directly or indirectly holding 10% or more of the total number of issued shares or voting rights of the corporation engaged in the Core Sector Designated Businesses.
Pursuant to the amendments to the Foreign Exchange Act which took effect in May 2025 (the “2025 Amendments”), the scope of the above-mentioned disqualified investors, who are not eligible for the exemptions described above, was expanded. As a result, disqualified investors include (a) certain foreign investors who have obligations to cooperate with foreign governments, etc. in collecting information pursuant to agreements with foreign governments, etc. or foreign laws and regulations (as prescribed in the Foreign Exchange Act) and (b) certain foreign investors who are owned by, or who have certain other relationships with, the foreign investors set forth in (a) above (as prescribed in the Foreign Exchange Act) (collectively, the “Specified Foreign Investors”), excluding those who are accredited by the Minister of Finance. In addition, the exemption from the prior notification requirement was amended not to apply to cases where a foreign investor is equivalent to Specified Foreign Investors (the “Quasi-Specified Foreign Investors”) (as prescribed in the Foreign Exchange Act). The Quasi-Specified Foreign Investors include foreign investors (i) whose managerial decision is made substantially by the foreign investors set forth in (a) above, (ii) whose managerial decision is made in a country other than the country of incorporation and affected by laws and regulations, etc. imposing obligations to cooperate with foreign governments, etc. in collecting information or (iii) who has obligations to disclose information to cooperate with foreign governments, etc. pursuant to agreements with the Specified Foreign Investors or the foreign investor set forth in (iii), seeks to acquire shares or voting rights, including authority to exercise, either directly or through instructions, voting rights owned by others, a listed corporation which is engaged in Core Sector Designated Businesses and also falls under the definition of “Specified Essential Infrastructure Service Providers” as defined in the Economic Security Promotion Act (the “Designated Core Business Entity”). This will be the case even if such foreign investor, (x) as a result of an acquisition of such shares or voting rights, including authority to exercise, either directly or through instructions, voting rights owned by others, of such listed corporation, together with parties that have a special relationship with that foreign investor, holds or has authority to exercise less than 10% of the total issued shares or voting rights of such listed corporation, or (y) falls under a category of certain foreign financial institutions (as prescribed in the Foreign Exchange Act) set forth in the preceding paragraph. Further, conditions for the above exemption, which must be complied with for a foreign investor to be exempted from the prior notification requirement, were amended to include the following two additional conditions, when they apply to cases of acquisitions by a Quasi-Specified Foreign Investor of shares or voting rights, including authority to exercise, either directly or through instructions, voting rights owned by others, of a listed corporation which is engaged in Core Sector Designated Businesses but is not a Designated Core Business Entity, as a result of which acquisition, together with parties that have a special relationship with that Quasi-Specified Foreign Investor, such Quasi-Specified Foreign Investor holds or has authority to exercise less than 10% of the total issued shares or voting rights of the above mentioned corporation:
| (i) | the foreign investor will not access non-public information in relation to the Core Sector Designated Businesses of such corporation, or take certain other actions that may lead to the leak of such non-public information (as prescribed in the Foreign Exchange Act); and |
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| (ii) | the foreign investor will not work, or cause its closely- related persons (prescribed in the Foreign Exchange Act) to work in relation to the Core Sector Designated Businesses of such corporation, as an employee for such corporation or will not solicit any officers or employees of such corporation to work for the foreign investor or any third party. |
For the purpose of regulations in connection with the “inward direct investment” under the Foreign Exchange Act, Japanese listed companies are classified into the following categories:
| (i) | companies engaged only in businesses other than Designated Businesses; |
| (ii) | companies engaged in Designated Businesses other than Core Sector Designated Businesses; |
| (iii) | companies engaged in Core Sector Designated Businesses other than Designated Core Business Entity; and |
| (iv) | corporations falling into Designated Core Business Entity. |
For reference purposes only, the Minister of Finance publishes, and may update from time to time, a list that classifies Japanese listed companies into the above categories, and according to the list on May 2, 2025 published by the Minister of Finance, businesses which are currently engaged by the Company is classified as category (iii) i.e., the Core Sector Designated Businesses above.
In addition, if a foreign investor intends to make a voting arrangement with respect to a Japanese listed company engaged in the Designated Businesses or consents to a proposal at the general meeting of shareholders of such company, in each case, that constitutes an “inward direct investment” as described above, in certain circumstances, prior notification of the relevant inward direct investment must be filed with the Minister of Finance and any other competent Ministers. However, the exemptions from the prior notification requirements may be available in the cases where the relevant voting arrangement is regarding matters other than certain matters which may control substantially or have material influence on the management of the relevant company, such as the election or removal of directors, which would have required prior notification.
Procedures for Prior Notification
If such prior notification is filed, the proposed inward direct investment may not be consummated until after 30 days have passed from the date of filing, although this screening period may be shortened to two weeks unless such Ministers deem it necessary to review the proposed inward direct investment. The Ministers may extend the screening period up to five months if they deem it necessary to review the proposed inward direct investment and may recommend any modification or abandonment of the proposed inward direct investment and, if the foreign investor does not accept such recommendation, the Ministers may order the modification or abandonment of such inward direct investment. In addition, if the Ministers consider the proposed inward direct investment to be an inward direct investment that is likely to cause damage to the national security of Japan and, if a foreign investor (i) consummates such inward direct investment without filing the prior notification described above; (ii) consummates such inward direct investment before the expiration of the screening period described above; (iii) in connection with such inward direct investment, makes false statements in the prior notification described above; or (iv) does not follow the recommendation or order issued by the Ministers to modify or abandon such inward direct investment, the Ministers may order such foreign investor to dispose of all or part of the shares acquired or take other measures.
Post Facto Reporting Requirements
A foreign investor who consummates an inward direct investment as described above through an acquisition of shares or voting rights or the authority to exercise, directly or through instructions, voting rights of a Japanese listed company that is engaged in the Designated Businesses, but is not subject to the prior notification requirements described above due to the exemptions from such prior notification requirements, in general, must
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file a report of the relevant inward direct investment with the Minister of Finance and any other competent Ministers having jurisdiction over such Japanese company within 45 days of such inward direct investment when, as a result of such acquisition, the foreign investor (excluding, in the cases of (i) and (ii) below, a foreign investor who falls under a category of certain foreign financial institutions (as prescribed in the Foreign Exchange Act)) directly or indirectly holds (i) 1% or more but less than 3% of the total number of issued shares or voting rights, for the first time, (ii) 3% or more but less than 10% of the total number of issued shares or voting rights, for the first time, or (iii) 10% or more of the total number of issued shares or voting rights.
Dividends and Proceeds of Sale
Under the Foreign Exchange Act, dividends paid on, and the proceeds of sales in Japan of, shares held by nonresidents of Japan, may, in general, be converted into any foreign currency and repatriated abroad. The acquisition of our shares by nonresidents by way of a stock split is not, in general, subject to any notification or reporting requirements.
10.E. TAXATION
Japanese Taxation
The following is a summary of the principal Japanese national tax consequences to owners of shares of our common stock or ADSs representing shares of our common stock who are Nonresident Shareholders. The statements regarding Japanese tax laws set forth below are based on the laws and treaties currently in force and as interpreted by the Japanese tax authorities at the date of this annual report and are subject to changes in the applicable Japanese law or tax treaties, conventions or agreements, or in the interpretation thereof, occurring after that date. This summary does not include all possible tax considerations which may apply to a particular investor and potential investors are advised to satisfy themselves as to the overall tax consequences of the acquisition, ownership and disposition of shares of our common stock or ADSs, including specifically the tax consequences under Japanese law, the laws of the jurisdiction of which they are resident, and any tax treaty, convention or agreement between Japan and their country of residence, by consulting their own tax advisors.
For the purpose of Japanese taxation, a Nonresident Shareholder of ADSs will generally be treated as the owner of the shares underlying the ADSs, which may be evidenced by one or more American Depositary Receipts (“ADRs”).
Generally, a Nonresident Shareholder of shares of our common stock or ADSs will be subject to Japanese income tax collected by way of withholding on dividends we pay. Stock splits are, in general, not subject to Japanese income tax or corporation tax.
In the absence of any applicable tax treaty, convention or agreement reducing the maximum rate of Japanese withholding tax or allowing exemption from Japanese withholding tax, the rate of Japanese withholding tax applicable to dividends paid by a Japanese corporation to Nonresident Shareholders is generally 20.42%. However, with respect to dividends paid on listed shares issued by a Japanese corporation (including shares of our common stock or ADSs) to Nonresident Shareholders, except for any Nonresident Shareholder who is an individual holding 3% or more of the total number of shares issued by the relevant Japanese corporation, the aforementioned 20.42% withholding tax rate is reduced to 15.315% for dividends due and payable on or before December 31, 2037. Due to the imposition of a special additional withholding tax (2.1% of the original withholding tax amount) to secure funds for reconstruction from the Great East Japan Earthquake, the original withholding tax rate of 15% and 20%, as applicable, has been effectively increased, respectively, to 15.315% and 20.42%, during the period beginning on January 1, 2013 and ending on December 31, 2037.
At the date of this annual report, Japan has income tax treaties in force, whereby the above-mentioned withholding tax rate is reduced, generally, to 15% for portfolio investors, with, among others, Canada, Denmark, Finland, Germany, Iceland, Ireland, Italy, Luxembourg, New Zealand, Norway and Singapore, while the income
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tax treaties with, among others, Australia, Austria, Belgium, France, Hong Kong, the Netherlands, Portugal, Sweden, Switzerland, the United Kingdom and the United States generally reduce the withholding tax rate to 10% for portfolio investors and the income tax treaties with, among others, Spain generally reduce the withholding tax rate to 5% for portfolio investors. In addition, under the income tax treaty between Japan and the United States, dividends paid to pension funds which are qualified U.S. residents eligible to enjoy treaty benefits are exempt from Japanese income taxation by way of withholding or otherwise unless the dividends are derived from the carrying on of a business, directly or indirectly, by those pension funds. Under the income tax treaties with Austria, Belgium, Denmark, Iceland, the Netherlands, Spain, Switzerland and the United Kingdom, similar treatment will be applied to dividends. Under Japanese tax law, any reduced maximum rate applicable under a tax treaty will be available when the maximum rate is below the rate otherwise applicable under Japanese tax law referred to in the preceding paragraph with respect to the dividends to be paid by us on shares of common stock or ADSs. A Nonresident Shareholder of shares of our common stock who is entitled, under any tax treaty, to a reduced rate of Japanese withholding tax, or exemption therefrom, as the case may be, is required to submit an Application Form for Income Tax Convention Regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on Dividends (together with any other required forms and documents) in advance, through the withholding agent, to the relevant tax authority before payment of dividends. A standing proxy for a Nonresident Shareholder may provide the application services. See “Item 10.B. Memorandum and Articles of Incorporation—Rights, Preferences and Restrictions of the Shares—Common Stock—General.” In addition, a simplified special filing procedure is available for Nonresident Shareholders to claim treaty benefits of exemption from or reduction of Japanese withholding tax by submitting a Special Application Form for Income Tax Convention Regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on Dividends of Listed Stocks (together with any other required forms and documents). With respect to ADSs, this reduced rate or exemption will be applicable to Nonresident Shareholders of ADSs if the depositary or its agent submits two Application Forms (one before payment of dividends and the other within eight months after the record date concerning such payment of dividends), together with certain other documents. To claim this reduced rate or exemption, Nonresident Shareholders of ADSs will be required to file a proof of taxpayer status, residence and beneficial ownership, as applicable, and to provide other information or documents as may be required by the depositary. A Nonresident Shareholder who is entitled, under any applicable tax treaty, to a reduced rate of Japanese withholding tax below the rate otherwise applicable under Japanese tax law mentioned above, or exemption therefrom, as the case may be, but fails to submit the required application in advance may nevertheless be entitled to claim a refund from the relevant Japanese tax authority of withholding taxes withheld in excess of the rate under an applicable tax treaty (if the Nonresident Shareholder is entitled to a reduced treaty rate under the applicable tax treaty) or the full amount of tax withheld (if the Nonresident Shareholder is entitled to an exemption under the applicable tax treaty), as the case may be, by complying with certain subsequent filing procedures. We do not assume any responsibility to ensure withholding at the reduced treaty rate, or exemption therefrom, for shareholders who would be so eligible under an applicable tax treaty but where the required procedures as stated above are not followed.
Gains derived from the sale outside Japan of shares of our common stock or ADSs by a Nonresident Shareholder who is a portfolio investor are, in general, not subject to Japanese income tax or corporation tax.
Any deposits or withdrawals of shares of our common stock by a Nonresident Shareholder in exchange for ADSs are, in general, not subject to Japanese income or corporation tax.
Japanese inheritance and gift taxes at progressive rates may be payable by an individual who has acquired shares of our common stock or ADSs from another individual as a legatee, heir or donee, even if none of the acquiring individual, the decedent or the donor is a Japanese resident.
Potential investors should consult with their own tax advisors regarding the Japanese tax consequences of the ownership and disposition of shares of common stock or ADSs in light of their particular situations.
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United States Federal Income Taxation
The following is a discussion of material U.S. federal income tax consequences to the U.S. Holders described below of owning and disposing of shares or ADSs, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a particular person’s decision to hold the shares or ADSs. This discussion does not address U.S. state, local or non-U.S. tax consequences. As used herein, a U.S. Holder is a person that, for U.S. federal income tax purposes, is a beneficial owner of shares or ADSs, is eligible for the benefits of the double taxation treaty between Japan and the United States (“Treaty”) and is: (1) a citizen or individual resident of the United States; (2) a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state therein or the District of Columbia; or (3) an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
Treasury regulations that apply to taxable years beginning on or after December 28, 2021 may in some circumstances prohibit a U.S. person from claiming a foreign tax credit with respect to certain non-U.S. taxes that are not creditable under applicable income tax treaties. Accordingly, U.S. investors that are not eligible for Treaty benefits should consult their tax advisors regarding the creditability or deductibility of any non-U.S. taxes imposed on them. This discussion does not apply to investors in this special situation.
The discussion applies only to U.S. Holders who hold the shares or ADSs as capital assets for U.S. federal income tax purposes. The discussion does not address any alternative minimum or Medicare contribution tax consequences, nor does it address all of the tax consequences which may be applicable to special classes of holders, such as:
| • | certain financial institutions; |
| • | insurance companies; |
| • | dealers and certain traders in securities; |
| • | persons holding shares or ADSs as part of a hedge, straddle, conversion or other integrated transaction; |
| • | persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar; |
| • | regulated investment companies; |
| • | real estate investment trusts; |
| • | partnerships or other entities classified as partnerships for U.S. federal income tax purposes; |
| • | tax-exempt entities, “individual retirement accounts” or “Roth IRAs”; |
| • | persons who acquired our shares or ADSs pursuant to the exercise of an employee stock option or otherwise as compensation; |
| • | persons holding shares or ADSs that own or are deemed to own 10% or more of our stock (by vote or value); or |
| • | persons holding shares or ADSs in connection with a trade or business conducted outside the United States. |
If a partnership holds shares or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding shares or ADSs, and partners in such partnerships, should consult their own tax advisors.
This discussion is based on the Internal Revenue Code of 1986, as amended, administrative pronouncements, judicial decisions and final, temporary and proposed United States Treasury regulations, as well as the Treaty all as of the date hereof. These laws are subject to change, possibly on a retroactive basis. It is also based in part on representations by the depositary and assumes that each obligation under the deposit agreement and any related agreement or undertaking will be performed in accordance with its terms.
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In general, a U.S. Holder who owns ADSs will be treated as the owner of the underlying shares represented by those ADSs for U.S. federal income tax purposes. Accordingly, no gain or loss will be recognized if a U.S. Holder exchanges ADSs for the underlying shares represented by those ADSs.
U.S. Holders should consult their own tax advisors concerning the U.S. federal, state, local and non-U.S. tax consequences of owning and disposing of shares or ADSs in their particular circumstances.
This discussion assumes that we are not, and will not become, a passive foreign investment company (a “PFIC”), as described below.
Taxation of Distributions
Distributions received by a U.S. Holder on shares or ADSs, including the amount of any Japanese taxes withheld, other than certain pro rata distributions of shares, will constitute foreign-source dividend income to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Because we do not maintain calculations of our earnings and profits under U.S. federal income tax principles, we expect that distributions generally will be reported to a U.S. Holder as dividends. The amount of the dividend a U.S. Holder will be required to include in income will equal the U.S. dollar value of the yen dividend, calculated by reference to the exchange rate in effect on the date the payment is received by the holder, or in the case of ADSs, by the depositary, regardless of whether the payment is converted into U.S. dollars on the date of receipt. If the dividend is converted into U.S. dollars on the date of receipt, the U.S. Holder generally should not be required to recognize foreign currency gain or loss in respect of the dividend payment. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt. Any foreign currency gain or loss realized by a U.S. Holder on a sale or other disposition of yen will be U.S.-source ordinary income or loss. Corporate U.S. Holders will not be entitled to claim a dividends-received deduction with respect to our dividends. Subject to applicable limitations, and the discussion above regarding concerns expressed by the U.S. Treasury, dividends received from us by certain noncorporate U.S. Holders may be taxable at favorable rates. Noncorporate U.S. Holders should consult their own tax advisors to determine whether they are subject to any special rules that limit their ability to be taxed at these favorable rates.
Subject to applicable restrictions and limitations that vary depending upon the U.S. Holder’s circumstances, Japanese taxes withheld from dividends on shares or ADSs (at a rate not exceeding the applicable rate provided by the Treaty) will be creditable against the U.S. Holder’s U.S. federal income tax liability. The limitation on foreign taxes eligible for credit is calculated separately with respect to different categories of income, such as passive income and general income. The rules governing foreign tax credits are complex. Instead of claiming a credit, a U.S. Holder may elect to deduct such Japanese taxes in computing its taxable income, subject to generally applicable limitations. An election to deduct foreign taxes instead of claiming foreign tax credits must apply to all creditable foreign taxes paid or accrued in the taxable year. U.S. Holders should consult their own tax advisors regarding the availability of foreign tax credits and deductions in their particular circumstances.
Sale and Other Disposition of the Shares or ADSs
A U.S. Holder will generally recognize capital gain or loss on the sale or other disposition of shares or ADSs, which will be long-term capital gain or loss if the U.S. Holder has held the shares or ADSs for more than one year. The amount of the U.S. Holder’s gain or loss will equal the difference between the amount realized on the sale or other disposition and the U.S. Holder’s tax basis in the shares or ADSs, each as determined in U.S. dollars. The deductibility of capital losses is subject to limitations. Any gain or loss will generally be U.S.-source gain or loss for foreign tax credit purposes.
PFIC Rules
Based upon certain proposed Treasury regulations that are not yet in effect, but are generally proposed to become effective for taxable years beginning after December 31, 1994, we believe that we were not a PFIC for
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U.S. federal income tax purposes for our taxable year ended March 31, 2025. However, since proposed Treasury regulations may not be finalized in their current form, and since PFIC status depends upon the composition of our income and assets and the market value of our assets from time to time, there can be no assurance that we will not be a PFIC for any taxable year. If we were a PFIC for any taxable year during which a U.S. Holder held shares, certain adverse U.S. federal income tax consequences could apply to the U.S. Holder.
Information Reporting and Backup Withholding
Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries may be subject to information reporting and backup withholding unless the U.S. Holder is an exempt recipient or, in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that no loss of exemption from backup withholding has occurred. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that the required information is timely furnished to the Internal Revenue Service.
Certain U.S. Holders who are individuals (or entities closely held by individuals) may be required to report information relating to their ownership of an interest in certain foreign financial assets, including stock of a non-U.S. person, generally on Form 8938, subject to exceptions (including an exception for stock held in a financial account, in which case the account may be reportable if maintained by a non-U.S. financial institution). U.S. Holders should consult their tax advisors regarding their reporting obligations with respect to the shares or ADSs.
10.F. DIVIDENDS AND PAYING AGENTS
Not applicable.
10.G. STATEMENT BY EXPERTS
Not applicable.
10.H. DOCUMENTS ON DISPLAY
We are subject to the reporting requirements of the Securities Exchange Act of 1934. In accordance with these requirements, we file annual reports on Form 20-F and furnish periodic reports on Form 6-K with the SEC.
These materials, including this annual report and the exhibits thereto, may be inspected at a website maintained by the SEC at https://www.sec.gov. Some of the information may also be found on our website at https://www.smfg.co.jp/english/.
10.I. SUBSIDIARY INFORMATION
Not applicable.
10.J. ANNUAL REPORT TO SECURITY HOLDERS
Not applicable.
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| Item 11. | Quantitative and Qualitative Disclosures about Credit, Market and Other Risk |
Quantitative and Qualitative Information about Risk Management
Risk Culture
In order for us to realize and maintain sustainable growth in corporate value, each of our directors, officers and other employees should think and judge on their own if their actions meet the expectations and requirements of customers, markets, and other stakeholders, not just if they are compliant with laws and regulations. We have established the “Behavioral Guideline on Compliance and Risk” for all our directors, officers and other employees to hold onto as a “keystone” of their daily business. Relevant concrete measures to foster a sound risk culture include internal surveys for monitoring the compliance awareness and risk sensitivity of our colleagues, as well as communication of messages from top management to employees and internal training.
Risk Appetite Framework
We have introduced a Risk Appetite Framework (“RAF”) for controlling SMBC Group-wide risks, that clarifies the types and levels of risk that we are willing to take on or are prepared to tolerate (risk appetite) in order to grow profits. RAF is one of two pivots of our business management alongside business strategies. It functions as a management framework for sharing information on the operating environment and risks facing us among management and for facilitating appropriate risk taking based thereon. Individual risk appetites have been established for specific business units or strategies as necessary based on our overall risk appetite.
We have a Risk Appetite Statement that provides a qualitative explanation of our approach to risk taking and risk management for each category: soundness, profitability, liquidity, credit, market, climate-related, reputational, model, operational, and conduct/compliance. We also have quantitative measures (i.e., Risk Appetite Measures) that function as benchmarks for risks that we are considering taking and for risk/return.
Risk appetites are decided during the process of formulating business strategies and management policies with the approval of the board of directors. These risk appetites are set based on Top Risks that threaten to significantly impact management and on risk analyses (stress testing) that illustrate the impact if a risk should materialize. In addition, risk register and Key Risk Events (“KRE”) are utilized as part of a system for assessing the risks present in new and existing business activities and for verifying the adequacy of Top Risks, risk appetites, and business strategies.
The outlooks for the operating environment and risks and the risk appetite situation are monitored throughout the course of the fiscal year. Risk Appetite Measures and business strategies are revised as necessary. For example, overall risk capital has been selected as an indicator for risk appetite, which displays the soundness of the SMBC Group. Risk capital is the amount of capital required to cover the theoretical maximum potential loss arising from risks of business operations. Overall risk capital is the aggregate of the risk capital amounts for each risk category. Management standards have been set for the upper limit for overall risk capital based on group-wide management strength. Overall risk capital levels are thus monitored throughout the course of each fiscal year to clearly indicate risk-taking capacity and promote the sound taking of risks.
In addition, specific risk appetite indicators have been set for credit risk, market risk, liquidity risk, and other risk categories to facilitate appropriate management based on a quantitative understanding of risk appetite.
Risk Management Categories
We classify risk into the following categories:
Credit Risk. Credit risk is the possibility of a loss arising from a credit event, such as deterioration in the financial condition of a borrower, that causes an asset (including off-balance sheet transactions) to lose value or become worthless.
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Market Risk. Market risk is the possibility that fluctuations in interest rates, foreign exchange rates, equity prices or other market prices will change the market value of financial products, leading to a loss.
Liquidity Risk. Liquidity risk is the risk that there may be difficulties in raising funds needed for settlements, as a result of the mismatching of uses of funds and sources of funds or unexpected outflows of funds, which may make it necessary to raise funds at higher rates than normal.
Operational Risk. Operational risk is the possibility of losses arising from inadequate or failed internal processes, people, and systems or from external events.
Conduct Risk. Conduct risk is the risk that customer protection, market soundness, fair competition, the public interest, and the Group’s stakeholders will be adversely affected by actions that violate laws, regulations, or social norms.
Reputational Risk. Reputational risk is the risk of not meeting the expectations for high ethics, integrity, etc. by the stakeholders (that is, customers, shareholders, market, society, environment, employees, etc.) due to the business of the SMBC Group and the behavior of employees and other related parties, as well as of leading to impairment of the corporate value and decline in trust.
Model Risk. Model risk is the risk of potential adverse consequences or financial loss resulting from misinformed decision making based on inaccurate model outputs or using the model inappropriately.
Environmental and Social Risk. Environmental and social risk is the risk that environmental and social factors become risk drivers and transmit through various pathways to other risk categories, ultimately resulting in losses to the SMBC Group. This risk includes climate-related risk, nature-related risk and human rights risk.
Top Risks
We identify risks that threaten to significantly impact management as Top Risks.
The selection of Top Risks involves comprehensive screening of risk factors, evaluation of each risk scenario’s possibility of occurrence and potential impact on management, and discussion by the Risk Management Committee and the Management Committee. Top Risks are utilized to enhance risk management by being incorporated into discussions of RAF and the formulation of business strategies and into the creation of risk scenarios for stress testing.
Stress Testing
We use stress testing to analyze and comprehend the impact of changes in economic or market conditions on the SMBC Group’s businesses, in order to plan and execute forward-looking business strategies.
In our stress testing, we prepare multiple risk scenarios including macroeconomic variables such as GDP, equity prices, interest rates, and foreign exchange rates based on the aforementioned Top Risks and discussions with experts and related departments.
When developing business strategies, we set out scenarios assuming stressed business environments such as serious economic recessions and market disruption for the sake of assessing risk-taking capabilities at SMBC Group and verifying whether adequate soundness can be maintained under stress. For example, we conduct stress testing assuming the resurgence of inflation primarily in Western countries, the aggressive monetary tightening implemented by central banks in response to rising inflation rates, the occurrence of a global recession, and the outbreak of a financial crisis to verify the soundness of the SMBC Group’s capital and to confirm the appropriate actions to be taken.
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During a fiscal year, we conduct stress testing in a timely manner to assess the potential impact on our business and to take the appropriate actions in case a serious risk event occurs.
In addition, we conduct detailed stress testing for individual risks such as credit risk, market risk, and liquidity risk, so as to decide and review risk-taking strategies. For example, we analyze liquidity risk under a severe scenario that combines idiosyncratic factors of the SMBC Group and market-wide factors.
We have included climate-related risk, such as natural disasters resulting from extreme weather (physical risks) and carbon-related stranded assets due to the transition to a decarbonized society (transition risks), in our Top Risks. Also, we have conducted scenario analyses to evaluate physical risks related to water disasters and declines in productivity due to rising temperatures, etc. on a global scale, as well as transition risks within the energy, power, automobile, and steel sectors to estimate the potential impacts on our financial position.
Risk Register
A risk register is formulated by each business unit for the purpose of realizing more sophisticated risk governance and enhancing business units’ risk ownership. In formulating these registers, business units communicate with risk management departments to identify the risks present in their business, and these risks are reflected in business strategies after they have been evaluated and the adequacy of measures for controlling them has been verified.
Key Risk Events
KRE, external events that indicate the increased threat of risks, have been identified to ascertain the symptoms of the potential risks. KRE are utilized to analyze and assess how likely similar cases will occur in SMBC Group and what effects such similar cases will have on SMBC Group, and to enhance our risk management system.
Risk Management Systems
Based on the recognition of the importance of risk management, top management is actively involved in the risk management process, and systems are in place for verifying the effectiveness and appropriateness of this process. Specifically, the SMBC Group-wide basic policies for risk management are determined by the Management Committee before being authorized by the board of directors, and regular reports are issued to the board of directors by the Group Chief Risk Officer (“CRO”) with regard to the status of risk management based on these policies.
Three lines of defense have been defined, and we have clarified related roles and responsibilities of relevant divisions. With these provisions in place, risk management systems have been established based on the characteristics of particular businesses, and measures are being put in place to strengthen and improve the effectiveness of these systems in accordance with these basic policies for risk management.
Furthermore, we are strengthening SMBC Group-wide risk management systems through the Group CRO Committee and the Global CRO Committee.
Three Lines of Defense
The Basel Committee on Banking Supervision’s “Corporate governance principles for banks” recommends “three lines of defense” as a framework for risk management and governance. Based on this framework, we have clarified the roles and responsibilities of each unit and we are taking steps to achieve more effective and stronger risk management and compliance systems.
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Our three lines of defense are as follows:
First Line. The business units shall be risk owners concerning their operations and shall be responsible for the following roles in accordance with the basic principles provided by the Second Line.
| • | Identification and evaluation of risks encountered in the business activities |
| • | Implementation of measures for minimizing and controlling risks |
| • | Monitoring of risks and reporting within the First Line and to the Second Line |
| • | Creation and fostering of a sound risk culture |
Second Line. The Risk Management and Compliance Departments shall assume the following functions and responsibilities in order to manage the risk management and compliance systems.
| • | Drafting and development of basic principles and frameworks concerning risk management and compliance |
| • | Oversight, monitoring, and development of training programs for the First Line |
Third Line. Independent from the First Line and Second Line, the Audit Dept. shall assess and verify the effectiveness and appropriateness of risk management and compliance systems managed and operated by the First Line and Second Line, and report these results to the audit committee and the Management Committee. The Department shall provide recommendations regarding identified issues or problems.
Implementation of Basel Regulation
Basel III is an international agreement on minimum capital, leverage, liquidity and other requirements applicable to internationally active banks. The Basel III capital framework was implemented in Japan from March 31, 2013 pursuant to revised capital adequacy guidelines adopted by the FSA, subject to the phase-in of some requirements, as contemplated by Basel III.
The Basel III framework is a continuation of Basel II, with multiple approaches to calculating capital requirements; we adopted the advanced IRB approach for measuring credit risk from March 31, 2009, and the standardized measurement approach by using the ILM for measuring operational risk from March 31, 2024.
Detailed information on our capital ratios is included in “Item 4.B. Business Overview—Regulations in Japan—Regulations Regarding Capital Adequacy and Liquidity” and “Item 5.B. Liquidity and Capital Resources—Capital Management.”
Credit Risk
Credit risk is the risk of incurring losses from the decline or loss of the value of an asset (including off-balance sheet items) that is caused by a credit event including but not limited to the deterioration of the financial condition of a borrower. Overseas credit transactions also entail country risk, which is closely related to credit risk. Country risk is the risk of incurring losses caused by changes in political or economic conditions. Credit exposures arise primarily from lending activities such as loans and advances, acquiring investment securities, derivative transactions, and off-balance sheet transactions such as the unused portion of loan commitments.
Credit Risk Management System
Credit risk is the most significant risk to which we are exposed. The purpose of credit risk management is to keep the credit risk exposure to a permissible level relative to capital, to maintain the quality of assets and to ensure returns commensurate with risk.
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At the SMBC Group, the Group CRO formulates credit risk management policies each year on the basis of SMBC Group-wide basic policies for risk management. The Credit & Investment Planning Department, responsible for the comprehensive management of credit risk, drafts and administers credit risk regulations including the SMBC Group credit policies, manages non-performing loans (“NPLs”), and performs other aspects of credit portfolio management. Also, the Credit Risk Committee deliberates on matters related to SMBC Group-wide credit portfolios. SMBC Group companies follow the fundamental principles established by us to assess and manage credit risk. Each of SMBC Group companies manages credit risk according to the nature of its business, and assesses and manages the credit risks of individual loans and credit portfolios quantitatively, using consistent standards.
At SMBC, our significant banking subsidiary, the Credit & Investment Planning Department within the Risk Management Unit is responsible for the comprehensive management of credit risk. This department drafts and administers credit policies, the internal rating system, credit authority guidelines and credit application guidelines, and manages NPLs, including impaired loans, and performs other aspects of credit portfolio management. The department also cooperates with the Corporate Risk Management Department and the Risk Management Information Department in quantifying credit risk (risk capital and risk-weighted assets) and controls SMBC’s entire credit risk. Further, the Credit & Investment Planning Department aims to stabilize the credit portfolio and manage the risk through credit derivatives, loan asset sales and other instruments.
The credit departments of SMBC, in cooperation with branches, conduct credit risk management for loans and manage portfolios. The credit limits they use are based on the baseline amounts that the Credit & Investment Planning Department establishes for each grading category, with particular attention paid to evaluating and managing customers or loans perceived to have particularly high credit risk. The Corporate Research Department engages in research on industries and analyzes the business and financial conditions of borrower enterprises to detect early signs of problems or growth potential. The Credit Administration Department is responsible for handling NPLs of borrowers classified as potentially bankrupt or lower, and formulates plans for workouts, including write-offs, and corporate rehabilitation. The department closely liaises with SMBC Servicer Co., Ltd., an SMBC Group company, which engages in related services to efficiently reduce the amount of NPLs, including through the sales of loans.
The Internal Audit Unit of SMBC, operating independently of the business units, audits asset quality, accuracy of grading and state of credit risk management, and reports the results directly to the board of directors, the Management Committee and audit & supervisory committee.
SMBC has established the Credit Risk Committee to undertake control of credit risk and to ensure the overall soundness of the loan operations.
Credit Risk Management Methods
To effectively manage the risk involved in individual loans as well as the credit portfolio as a whole, we first acknowledge that every loan entails credit risk, assess the credit risk posed by each borrower and loan using an internal rating system, and quantify that risk for control purposes.
Credit Risk Evaluation
At SMBC, the Credit & Investment Planning Department manages an internal rating system for each asset control category set according to portfolio characteristics. For example, credits to commercial and industrial (“C&I”) companies, individuals for business purposes (domestic only), sovereigns, public sector entities, and financial institutions are assigned an “obligor grade,” which indicates the borrower’s creditworthiness, and/or “facility grade,” and indicates the collectability of assets taking into account the transaction conditions such as guarantee/collateral, and tenor. The business units determine an obligor grade by first assigning a financial grade using a financial strength grading model and data obtained from the obligor’s financial statements, including net
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worth and cash flows. The financial grade is then adjusted taking into account the actual state of the obligor’s financial position and qualitative factors to derive the obligor grade. The qualitative factors mainly include the expected future cash flows taking into account factors such as historical loss information, the appropriateness of the borrower’s business plan or operational improvement plan, the status of progress of its plan, and the overall support from financial institutions. In the event that the borrower is domiciled overseas, internal ratings for credit are made after taking into consideration the country rank, which represents an assessment of the credit quality of each country based on its political and economic situation, as well as its current account balance and external debt. Obligor grades and facility grades are reviewed once a year and as otherwise necessary, such as when there are changes in the credit situation. Our subsidiaries carry out credit risk evaluations in line with SMBC.
There are also grading systems for loans to individuals such as housing loans and structured finance including project finance, where the repayment source is limited to the cash flows generated by a particular business or asset. For example, the obligor grade of housing loans is determined taking into account various relevant factors such as proportion of the repayment to revenue, proportion of down payment to the value and past due information.
The Credit & Investment Planning Department of SMBC centrally manages the internal rating systems, and designs, operates, supervises and validates the grading models. It validates the grading models (including statistical validation) of main assets following the procedure manual once a year to ensure their effectiveness and suitability.
Quantification of Credit Risk
At SMBC, credit risk quantification refers to the process of estimating the degree of credit risk of a portfolio or individual loan taking into account not just the obligor’s probability of default (“PD”), but also the concentration of risk in a specific customer or industry and the loss impact of fluctuations in the value of collateral, such as real estate and securities.
Specifically, the PD by grade, loss given default (“LGD”), credit quality correlation among obligors, and other parameter values are estimated using the historical data of obligors and facilities stored in a database to calculate the credit risk. Then, based on these parameters, SMBC runs a simulation of simultaneous default using the Monte Carlo Simulation to calculate SMBC’s maximum loss exposure to the estimated amount of the maximum losses that may be incurred. Based on these quantitative results, SMBC allocates risk capital.
Risk quantification is also executed for purposes such as to determine the portfolio’s risk concentration or to simulate economic movements (stress tests), and the results are used for making optimal decisions across the whole range of business operations, including formulating business plans and providing a standard against which individual credit applications are assessed.
Credit Assessment
At SMBC, the credit assessment of corporate loans involves a variety of financial analyses, including cash flows, to predict an enterprise’s capability of loan repayment and its growth prospects. These quantitative measures, when combined with qualitative analyses of industrial trends, the enterprise’s research and development capabilities, the competitiveness of its products or services, and its management caliber, result in a comprehensive credit assessment. The loan application is analyzed in terms of the intended utilization of the funds and the repayment schedule. In the assessment of housing loans for individuals, SMBC employs a credit assessment model based on credit data amassed and analyzed by SMBC over many years, taking into account various relevant factors including proportion of the repayment to revenue, proportion of down payment to the value and past due information.
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Credit Monitoring
At SMBC, in addition to analyzing loans at the application stage, the Credit Monitoring System is utilized to reassess obligor grades, and review credit policies for each obligor so that problems can be detected at an early stage, and quick and effective action can be taken. The system includes annual monitoring that is carried out each time the financial results of the obligor enterprise are obtained, as well as ad-hoc monitoring that is performed each time credit conditions change.
Credit Portfolio Management
Risk-Taking Within the Scope of Capital
To keep the credit risk exposure to a permissible level relative to capital, the Corporate Risk Management Department of the SMBC Group sets a credit risk capital limit for internal control purposes. The Corporate Risk Management Department conducts monthly monitoring to make sure that these limits are being followed.
Controlling Concentration Risk
As our equity capital may be materially impaired in the event that the credit concentration risk becomes apparent, the Credit & Investment Planning Department of the SMBC Group therefore takes measures to manage concentration risks, such as introducing large exposure limits and conducting intensive loan reviews for obligors with large exposures, with an increased focus on industrial sectors with an excessive concentration of credit risk. Further, to manage country risk, SMBC’s Strategic Planning Department of the Global Banking Unit has credit limit guidelines based on each country’s creditworthiness.
Toward Active Portfolio Management
The Credit & Investment Planning Department makes use of financial instruments to proactively and flexibly manage SMBC’s portfolio to stabilize credit risk.
Market Risk and Liquidity Risk
Market risk is the possibility that fluctuations in interest rates, foreign exchange rates, equity prices or other market prices will change the market value of financial products, leading to a loss. The purpose of market risk management is to keep the market risk exposure to a permissible level relative to capital.
Liquidity risk is defined as the uncertainty around our ability to meet our debt obligations without incurring unacceptably large losses. An example of such risk is the possible inability to meet our current and future cash flow/collateral needs, both expected and unexpected. In such cases, we may be required to raise funds at less than favorable rates or be unable to raise sufficient funds for settlement. The purpose of liquidity risk management is to ensure that we are in a position to address our liquidity obligations through monitoring the liquidity gap between assets and liabilities, and by maintaining highly liquid supplementary funding resources.
On the basis of the SMBC Group-wide basic policies for risk management, we have a quantitative management process to control market and liquidity risks on an SMBC Group-wide basis. We at least annually review and identify which companies primarily carry the market and liquidity risks within us. We set permissible level limits of risk for each identified company in consideration of those companies’ business plans. We ensure that each identified company establishes a risk management system that is appropriate to the risks it faces, and has built-in transparent risk management processes which clearly separate front, middle and back office operations, and establishes a control system of mutual checks and balances.
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Framework for Market and Liquidity Risk Management
The board of directors authorizes important matters related to the management of market and liquidity risks, such as the basic policies and risk appetite, which are decided by the Management Committee. The Corporate Risk Management Department and the Risk Management Information Department, which are independent from the business units that directly handle market transactions, manage market and liquidity risks in an integrated manner. The Corporate Risk Management Department and the Risk Management Information Department not only monitor the current risk situations but also report regularly to the Management Committee and the board of directors.
Additionally, the Asset Liability Management (“ALM”) Committee meets on a quarterly basis to examine reports on the state of market and liquidity risk management and to discuss our ALM operation policies. Furthermore, SMBC’s ALM Committee meets on a monthly basis to examine reports on the state of market and liquidity risks and to discuss SMBC’s ALM operations.
Under our internal audit system, internal audits are also periodically performed to verify that the risk management framework is functioning properly.
Market Risk Management Methods
Market Risk Management Process
We manage market risk capital derived from trading activities and non-trading activities, including equity holding investments and other transactions in the RAF by taking into account our shareholders’ equity and other principal indicators of our financial position. We also establish an upper limit on value at risk (“VaR”) and losses as Risk Appetite Measures.
Our market risk can be divided into various factors: interest rates, foreign exchange rates, equity prices and option risks. We manage each of these risks by employing the VaR method as well as supplemental indicators suitable for managing each risk, such as the basis point value (“BPV”).
VaR is the largest predicted loss that is possible given a fixed confidence interval. For example, our VaR indicates the largest loss that is possible for a holding period of one day and a confidence interval of 99.0%. BPV is the amount of change in assessed value as a result of a one-basis-point (0.01%) movement in interest rates.
Market Risk Measurement Techniques—Value at Risk
The principal SMBC Group companies’ internal VaR model makes use of historical data to prepare scenarios for market fluctuations and, by conducting simulations of gains and losses on a net position basis, the model estimates the potential losses that may occur. The VaR calculation method we employ for both trading and non-trading activities is based mainly on the following:
| • | the historical simulation method; |
| • | a one-sided confidence interval of 99.0%; |
| • | a one-day holding period (a one-year holding period for the equity holding investment portfolio); and |
| • | an observation period of four years (ten years for the equity holding investment portfolio). |
This method is reviewed periodically and refined, if necessary.
The relationship between the VaR calculated by the model and the hypothetical profit and loss data is back-tested periodically. There were no significant excess losses that would raise doubts on the validity of the model in the back-testing results, including from the trading accounts. The back-testing results are reviewed by management, which also monitors the ongoing suitability of the VaR model.
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For products and positions where the historical simulation method is not applied, risk amounts are measured using reasonable and conservative methods and are also added to the risk amounts calculated using the historical simulation method.
Trading Activities
Most of our trading activity is undertaken to accommodate the needs of commercial banking customers for interest rate and foreign exchange transactions. However, some interest rate and foreign exchange rate positions are taken using derivatives and other on-balance sheet instruments with the objective of earning a profit from favorable movements in market rates. The overall objective of managing market risk is to avoid unexpected losses due to changes in market prices.
Non-Trading Activities
The market risk for non-trading activity arises principally from the interest rate risk of our ALM operations, or banking, including loans, debt investment securities, deposits, and long- and short-term borrowings, and from the equity risk of our equity holding investments. ALM operations are regularly reviewed and discussed by the ALM Committee so as not to be heavily exposed to market fluctuations. Equity holding investment is a portfolio that consists principally of publicly traded Japanese equities. This portfolio, like that of other financial institutions in Japan, has historically included shares of our customers.
VaR Summary for the Fiscal Years Ended March 31, 2025 and 2024
The following tables show our VaR by risk category and these figures are prepared based on the internal reporting provided to management. Our material market risk exposure categories consist of interest rate risk, foreign exchange risk, equities and commodities risk and others. The section headed “VaR for Trading Activity” shows our VaR for instruments entered into for trading purposes and the VaR model for the trading book includes principal consolidated subsidiaries. The section headed “VaR for Non-Trading Activity” shows our VaR for instruments entered into for purposes other than trading purposes. “Equity Holding Investment” in the “VaR for Non-Trading Activity” section is a portfolio that consists principally of publicly traded Japanese equities. This portfolio, like that of other financial institutions in Japan, has historically included shares of our customers.
(a) VaR for Trading Activity
| Interest rate risk |
Foreign exchange risk |
Equities and commodities risk |
Others | Total(1) | ||||||||||||||||
| (In billions) | ||||||||||||||||||||
| For the fiscal year ended March 31, 2025: |
||||||||||||||||||||
| SMBC Consolidated |
||||||||||||||||||||
| Maximum |
¥ | 7.2 | ¥ | 6.7 | ¥ | 2.4 | ¥ | 21.5 | ¥ | 26.9 | ||||||||||
| Minimum |
4.4 | 3.2 | 0.1 | 12.4 | 17.8 | |||||||||||||||
| Daily average |
6.0 | 5.1 | 0.7 | 17.0 | 22.6 | |||||||||||||||
| At March 31, 2025 |
5.7 | 5.4 | 0.2 | 19.1 | 23.9 | |||||||||||||||
| SMFG Consolidated |
||||||||||||||||||||
| Maximum |
¥ | 24.1 | ¥ | 8.4 | ¥ | 22.3 | ¥ | 21.5 | ¥ | 61.8 | ||||||||||
| Minimum |
17.8 | 4.5 | 2.9 | 12.4 | 38.4 | |||||||||||||||
| Daily average |
19.5 | 6.5 | 5.7 | 17.0 | 42.1 | |||||||||||||||
| At March 31, 2025 |
18.3 | 7.1 | 3.0 | 19.1 | 40.8 | |||||||||||||||
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| Interest rate risk |
Foreign exchange risk |
Equities and commodities risk |
Others | Total(1) | ||||||||||||||||
| (In billions) | ||||||||||||||||||||
| For the fiscal year ended March 31, 2024: |
||||||||||||||||||||
| SMBC Consolidated |
||||||||||||||||||||
| Maximum |
¥ | 39.6 | ¥ | 33.5 | ¥ | 2.8 | ¥ | 14.1 | ¥ | 21.5 | ||||||||||
| Minimum |
5.1 | 2.6 | 0.1 | 5.1 | 10.9 | |||||||||||||||
| Daily average |
10.4 | 7.8 | 1.3 | 9.5 | 15.3 | |||||||||||||||
| At March 31, 2024 |
5.6 | 4.0 | 0.1 | 13.3 | 17.5 | |||||||||||||||
| SMFG Consolidated |
||||||||||||||||||||
| Maximum |
¥ | 49.6 | ¥ | 34.9 | ¥ | 12.8 | ¥ | 14.1 | ¥ | 46.4 | ||||||||||
| Minimum |
15.7 | 3.8 | 5.2 | 5.1 | 27.2 | |||||||||||||||
| Daily average |
22.5 | 9.0 | 7.4 | 9.5 | 34.4 | |||||||||||||||
| At March 31, 2024 |
19.5 | 5.2 | 8.1 | 13.3 | 40.0 | |||||||||||||||
| (1) | Total for “Maximum,” “Minimum,” and “Daily average” represent the maximum, minimum and daily average of the total of the trading book. |
(b) VaR for Non-Trading Activity
(i) Banking
| Interest rate risk |
Foreign exchange risk |
Equities and commodities risk |
Others | Total(1) | ||||||||||||||||
| (In billions) | ||||||||||||||||||||
| For the fiscal year ended March 31, 2025: |
||||||||||||||||||||
| SMBC Consolidated |
||||||||||||||||||||
| Maximum |
¥ | 80.6 | ¥ | 0.2 | ¥ | 35.6 | ¥ | 0.0 | ¥ | 94.7 | ||||||||||
| Minimum |
56.4 | 0.0 | 12.6 | 0.0 | 58.2 | |||||||||||||||
| Daily average |
66.9 | 0.0 | 28.0 | 0.0 | 73.7 | |||||||||||||||
| At March 31, 2025 |
61.3 | 0.1 | 32.6 | 0.0 | 62.5 | |||||||||||||||
| SMFG Consolidated |
||||||||||||||||||||
| Maximum |
¥ | 82.1 | ¥ | 0.2 | ¥ | 35.6 | ¥ | 0.0 | ¥ | 96.3 | ||||||||||
| Minimum |
57.6 | 0.0 | 12.6 | 0.0 | 59.5 | |||||||||||||||
| Daily average |
68.2 | 0.0 | 28.0 | 0.0 | 75.0 | |||||||||||||||
| At March 31, 2025 |
62.5 | 0.1 | 32.6 | 0.0 | 63.6 | |||||||||||||||
| Interest rate risk |
Foreign exchange risk |
Equities and commodities risk |
Others | Total(1) | ||||||||||||||||
| (In billions) | ||||||||||||||||||||
| For the fiscal year ended March 31, 2024: |
||||||||||||||||||||
| SMBC Consolidated |
||||||||||||||||||||
| Maximum |
¥ | 91.4 | ¥ | 0.5 | ¥ | 32.6 | ¥ | 0.0 | ¥ | 98.1 | ||||||||||
| Minimum |
60.7 | 0.0 | 4.0 | 0.0 | 64.1 | |||||||||||||||
| Daily average |
75.8 | 0.0 | 21.3 | 0.0 | 84.6 | |||||||||||||||
| At March 31, 2024 |
78.0 | 0.0 | 31.8 | 0.0 | 93.5 | |||||||||||||||
| SMFG Consolidated |
||||||||||||||||||||
| Maximum |
¥ | 92.8 | ¥ | 0.5 | ¥ | 32.6 | ¥ | 0.0 | ¥ | 99.5 | ||||||||||
| Minimum |
62.1 | 0.0 | 4.0 | 0.0 | 65.5 | |||||||||||||||
| Daily average |
77.1 | 0.0 | 21.3 | 0.0 | 85.9 | |||||||||||||||
| At March 31, 2024 |
79.6 | 0.0 | 31.8 | 0.0 | 95.1 | |||||||||||||||
| (1) | Total for “Maximum,” “Minimum,” and “Daily average” represent the maximum, minimum and daily average of the total of the banking book. |
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(ii) Equity Holding Investment
| Equities risk | ||||
| (In billions) | ||||
| For the fiscal year ended March 31, 2025: |
||||
| SMBC Consolidated |
||||
| Maximum |
¥ | 1,258.2 | ||
| Minimum |
937.3 | |||
| Daily average |
1,134.5 | |||
| At March 31, 2025 |
960.3 | |||
| SMFG Consolidated |
||||
| Maximum |
¥ | 1,576.8 | ||
| Minimum |
1,233.7 | |||
| Daily average |
1,456.7 | |||
| At March 31, 2025 |
1,323.4 | |||
| Equities risk | ||||
| (In billions) | ||||
| For the fiscal year ended March 31, 2024: |
||||
| SMBC Consolidated |
||||
| Maximum |
¥ | 1,263.3 | ||
| Minimum |
970.9 | |||
| Daily average |
1,135.0 | |||
| At March 31, 2024 |
1,252.7 | |||
| SMFG Consolidated |
||||
| Maximum |
¥ | 1,582.6 | ||
| Minimum |
1,189.3 | |||
| Daily average |
1,401.0 | |||
| At March 31, 2024 |
1,567.2 | |||
Stress Tests
The market occasionally undergoes extreme fluctuations that exceed projections. Therefore, to manage market risk, it is important to run simulations of situations that may occur only once in many years, or so-called stress tests. To prepare for unexpected market swings, we perform stress tests on a monthly basis based on various scenarios.
The limitations of the VaR methodology include the following:
| • | The use of historical data as a proxy for estimating future events may underestimate the probability of extreme market movements. Past market movement is not necessarily a good indicator of future events; |
| • | The use of a holding period assumes that all positions can be liquidated or hedged in that period of time. This assumption does not fully capture the market risk arising during periods of illiquidity, when liquidation or hedging in that period of time may not be possible; |
| • | The use of a confidence level neither takes account of, nor makes any statement about, any losses that might occur beyond this level of confidence; and |
| • | VaR does not capture all of the complex effects of the risk factors on the value of positions and portfolios and could underestimate potential losses. |
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Additional Information for Certain Risks
(a) Interest Rate Risk
To supplement the above limitations of VaR methodologies, the SMBC Group adopts various indices to measure and monitor the sensitivity of interest rates, including delta, gamma and vega risks. The SMBC Group considers BPV as one of the most significant indices to manage interest rate risk. BPV is the amount of change in the value to the banking and trading book as a result of a one-basis-point (0.01%) movement in interest rates. The principal SMBC Group companies use BPV to monitor interest rate risk, not only on a net basis, but also by term to prevent the concentration of interest rate risk in a specific period. In addition, as previously addressed, the SMBC Group enhances the risk management methods of VaR and BPV by using them in combination with back-testing and stress tests.
Interest rate risk substantially changes depending on the method used for recognizing the expected maturity dates of demand deposits that can be withdrawn at any time or the method used for estimating the timing of cancellation prior to maturity of time deposits and consumer housing loans. At SMBC, the maturity of demand deposits that are expected to be left with SMBC for a prolonged period is regarded to be at the longest five years (2.5 years on average), and the cancellation prior to maturity of time deposits and consumer housing loans is estimated based on historical data.
Based on the standards for interest rate risk in the banking book issued by the BCBS in April 2016, the FSA revised the related regulatory guidelines pertaining to monitoring of interest rate risks in the banking book in December 2017. The revised disclosure requirements with respect to the changes in economic value of equity (“ΔEVE”) and changes in net interest income (“ΔNII”) in the banking book as a result of interest rate shocks have been applied from March 31, 2018. The tables below present ΔEVE and ΔNII of SMBC and SMFG on a consolidated basis at March 31, 2025 and 2024, respectively.
ΔEVE is defined as a decline in economic value as a result of an interest rate shock. It is calculated by multiplying the interest rate sensitivity (excluding credit spread) and interest rate change. The FSA implements a “materiality test” to identify banks taking excessive interest rate risks. Under the materiality test, the FSA monitors the ratio of ΔEVE to Tier 1 capital based on a set of prescribed interest rate shock scenarios. The threshold applied by the FSA is 15% and the ratios for SMBC on a consolidated basis at March 31, 2025 and 2024 were 3.0% and 2.5%, respectively, and those for SMFG on a consolidated basis at March 31, 2025 and 2024 were 2.9% and 2.2%, respectively.
ΔNII is defined as a decline in interest income over a rolling 12-month period as a result of an interest rate shock. It is calculated assuming a constant balance sheet over a forward-looking rolling 12-month period.
| At March 31, 2025 | At March 31, 2024 | |||||||||||||||
| ΔEVE | ΔNII | ΔEVE | ΔNII | |||||||||||||
| (In billions) | ||||||||||||||||
| SMBC Consolidated |
||||||||||||||||
| Parallel shock up |
¥ | 378.3 | ¥ | (251.5 | ) | ¥ | 295.8 | ¥ | (506.1 | ) | ||||||
| Parallel shock down |
107.4 | 378.6 | 172.7 | 692.7 | ||||||||||||
| Steepener shock |
19.2 | — | 40.5 | — | ||||||||||||
| Flattener shock |
281.4 | — | 224.6 | — | ||||||||||||
| Short rate shock up |
342.4 | — | 173.9 | — | ||||||||||||
| Short rate shock down |
11.5 | — | 39.8 | — | ||||||||||||
| Maximum |
378.3 | 378.6 | 295.8 | 692.7 | ||||||||||||
| At March 31, 2025 | At March 31, 2024 | |||||||
| (In billions) | ||||||||
| Tier 1 Capital |
¥ | 12,410.7 | ¥ | 11,937.9 | ||||
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| At March 31, 2025 | At March 31, 2024 | |||||||||||||||
| ΔEVE | ΔNII | ΔEVE | ΔNII | |||||||||||||
| (In billions) | ||||||||||||||||
| SMFG Consolidated |
||||||||||||||||
| Parallel shock up |
¥ | 378.3 | ¥ | (251.5 | ) | ¥ | 295.8 | ¥ | (506.1 | ) | ||||||
| Parallel shock down |
107.4 | 378.6 | 172.7 | 692.7 | ||||||||||||
| Steepener shock |
19.2 | — | 40.5 | — | ||||||||||||
| Flattener shock |
281.4 | — | 224.6 | — | ||||||||||||
| Short rate shock up |
342.4 | — | 173.9 | — | ||||||||||||
| Short rate shock down |
11.5 | — | 39.8 | — | ||||||||||||
| Maximum |
378.3 | 378.6 | 295.8 | 692.7 | ||||||||||||
| At March 31, 2025 | At March 31, 2024 | |||||||
| (In billions) | ||||||||
| Tier 1 Capital |
¥ | 13,258.8 | ¥ | 13,311.6 | ||||
| Note: | ΔEVE and ΔNII are calculated by currency and the results are aggregated across the various currencies. For ΔNII, only Japanese yen and U.S. dollars are included in the calculation. These are the material currencies where interest rate sensitive assets and liabilities are more than 5% of total assets and liabilities. |
(b) Foreign Exchange Risk
The principal SMBC Group companies set risk limits for each currency to manage the concentration of the foreign currency position. The foreign exchange risk is immaterial as shown above in VaR by risk category.
(c) Equity Holding Investment Risk
We establish limits on allowable risk for equity holding investments, and monitor the observance of those limits to keep equity price fluctuation risk within acceptable parameters. We have been reducing our equity holding investments, and the balance is within a permitted level, which is less than 100% of our consolidated Tier 1 Capital. See “Item 4.B. Business Overview—Regulations in Japan—Regulations for Stabilizing the Financial System—Restriction on Aggregate Shareholdings by a Bank.”
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Liquidity Risk Management Methods
We regard liquidity risk as one of the major risks. Our liquidity risk management is based on a framework consisting of setting Risk Appetite Measures and establishing contingency plans.
The Risk Appetite Measures are measures for selecting the types and levels of risk that we are willing to take on or tolerate. As the level of liquidity risk is evaluated based on cash flow and balance sheet conditions, Risk Appetite Measures have been set for both of these areas. These measures include the Liquidity Coverage Ratio, a liquidity regulation, as well as a measure of the periods for which it will be possible to maintain funding levels even under stress due to deposit outflows or other factors, and the ratio which shows how much the stable funding covers the funding for loans and other assets.
The tolerated levels of risk are set based on account funding status, cash management planning, economic environments and other factors, and measures are monitored on a daily or monthly basis in order to limit reliance on short-term funding and appropriately manage liquidity.
As a framework to complement the Risk Appetite Measures, upper limits are set in place on both an SMBC Group company basis and individual branch bases with regard to funding gaps, which are defined as a maturity mismatch between the source of funds and use of funds.
Furthermore, contingency plans are established in preparation for emergency situations. These plans contain information on chains of command and lines of reporting as well as detailed action plans depending on the existing situation (i.e., normal, concerned, or crisis). Meanwhile, SMBC carries out quantitative management of alert indications based on early warning indicators established to assist the bank in promptly and systematically detecting liquidity risks.
Operational Risk
Operational risk is the possibility of losses arising from inadequate or failed internal processes, people and systems or from external events. Specifically, it covers processing risk, system risk, legal risk, human resources risk, tangible asset risk and third party risk. We have prepared operational risk management regulations to define the basic rules to be observed across the SMBC Group. Under these regulations, we are working to raise the level of sophistication of our management of operational risk across the SMBC Group by providing an effective framework for the identification, assessment, control and monitoring of significant risk factors and by establishing a system for executing contingency and business continuity plans.
Processing risk is the risk of losses arising from the failure of directors and employees to perform administrative duties in accordance with administrative rules and procedures, or from accidents or misconduct. We have clarified the divisions responsible for the oversight functions for processing risk management, and we are working to raise the level of sophistication of our management of processing risk across the whole SMBC Group by establishing systems for managing the processing risks faced by SMBC Group companies, ensuring in-office inspection, minimizing losses in the event of processing risk materialization by drafting exhaustive contingency plans, and carrying out thorough quantification of the risk under management as basic principles.
System risk is the risk arising from nonconformity to the business strategy, inappropriate technologies applied, changes to the development plan and delay in development when building an information system, and the risk of loss incurred due to the breakdown including those caused by cyber attack (unauthorized alteration, destruction, duplication and leakage of the information). We have set the following as basic principles: recognizing information systems as an essential part of management strategy taking into account advances in IT, minimizing system risk by drafting regulations and specific management standards, (including a security policy) and establishing contingency plans to minimize losses if a system risk materializes.
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Conduct Risk
Conduct risk is the risk that customer protection, market soundness, fair competition, the public interest, and the Group’s stakeholders will be adversely affected by actions that violate laws, regulations, or social norms. SMBC Group’s fundamental stance is that its business is not to negatively affect customers, market integrity, effective competition, public interests, and stakeholders. Efforts are being made to improve group-wide conduct risk management. Focuses of these efforts include preemptively identifying phenomena with the potential to cause significant deterioration in the trust of the SMBC Group and preventing the materialization of serious management risks by being keenly responsive to environmental changes.
Reputational Risk
Reputational risk is the risk of not meeting the expectations for high ethics, integrity, etc. by the stakeholders (that is, customers, shareholders, market, society, environment, employees, etc.) due to the business of the SMBC Group and the behavior of employees and other related parties, as well as of leading to impairment of the corporate value and decline in trust. We have prepared reputational risk management regulations to define the basic rules to be observed across the SMBC Group. Under these regulations, we are working to clarify our operating system of reputational risk, systems, methods and rules of reputational risk management and realize a highly efficient reputational risk management.
Model Risk
Model risk is the risk of potential adverse consequences or financial loss resulting from misinformed decision making based on inaccurate model outputs or using the model inappropriately. SMBC Group has established a system for managing model risk based on the group-wide basic policies for risk management. SMBC Group is working to improve model risk management across the Group by adhering to basic principles such as performing management based on a risk-based approach, evaluating model risk and carrying out quantitative management.
Environmental and Social Risk
Environmental and social risk is the risk that environmental and social factors become risk drivers and transmit through various pathways to each risk category such as credit risk, operational risk, and reputational risk, ultimately resulting in losses to the SMBC Group. This risk includes climate-related risk, nature-related risk and human rights risk. We have developed environmental and social risk management policies to define the basic rules to be complied across the SMBC Group. Under these regulations, we identify the locations of environmental and social risk to be managed, and then to conduct management in an appropriate manner according to the characteristics of environmental and social risk.
| Item 12. | Description of Securities other than Equity Securities |
12.A. DEBT SECURITIES
Not applicable.
12.B. WARRANTS AND RIGHTS
Not applicable.
12.C. OTHER SECURITIES
Not applicable.
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12.D. AMERICAN DEPOSITARY SHARES
Under the terms of the deposit agreement, an ADS holder may have to pay the following service fees to the depositary:
| Service |
Fees | |
| Issuance of ADSs | Up to U.S. 5¢ per ADS issued | |
| Cancellation of ADSs | Up to U.S. 5¢ per ADS canceled | |
| Distribution of cash dividends or other cash distributions | Up to U.S. 5¢ per ADS held | |
| Distribution of ADSs pursuant to stock dividends, free stock distributions or exercises of rights | Up to U.S. 5¢ per ADS held | |
| Distribution of securities other than ADSs or rights to purchase additional ADSs | Up to U.S. 5¢ per ADS held | |
| Depositary services | Up to U.S. 5¢ per ADS held on the applicable record date(s) established by the depositary | |
An ADS holder will also be responsible for paying certain fees and expenses incurred by the depositary and certain taxes and governmental charges such as:
| • | taxes (including applicable interest and penalties) and other governmental charges; |
| • | the registration fees applicable to transfers of shares or other deposited securities to or from the name of the custodian, the depositary or any nominees upon the making of deposits or withdrawals, respectively; |
| • | the cable, telex and facsimile transmission and delivery expenses expressly provided in the deposit agreement to be at the expense of the person depositing or withdrawing shares or holders and beneficial owners of ADSs; |
| • | the expenses and charges incurred by the depositary in the conversion of foreign currency; |
| • | the fees and expenses incurred by the depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to shares, deposited securities, ADSs and ADRs; and |
| • | the fees and expenses incurred by the depositary, the custodian or any nominee in connection with the servicing or delivery of deposited securities. |
Depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary by the brokers (on behalf of their clients) receiving the newly issued ADSs from the depositary and by the brokers (on behalf of their clients) delivering the ADSs to the depositary for cancellation. The brokers in turn charge these transaction fees to their clients.
Citibank, N.A., as depositary, has agreed to reimburse the Company for certain expenses the Company incurs in connection with its ADR program, subject to certain ceilings. During the fiscal year ended March 31, 2025, we received $358,681.09 as reimbursement for such expenses.
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PART II
| Item 13. | Defaults, Dividend Arrearages and Delinquencies |
None.
| Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds |
None.
| Item 15. | Controls and Procedures |
Disclosure Controls and Procedures
We carried out an evaluation under the supervision and with the participation of our management, including Toru Nakashima, our President and Group Chief Executive Officer, and Kazuyuki Anchi, our Senior Managing Corporate Executive Officer and Group Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) at March 31, 2025. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable, not absolute, assurance of achieving their control objectives. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based upon the evaluation referred to above, Toru Nakashima and Kazuyuki Anchi concluded that the design and operation of our disclosure controls and procedures at March 31, 2025 were effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Our internal control over financial reporting includes those policies and procedures that:
| (i) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; |
| (ii) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
| (iii) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management evaluated the effectiveness of our internal control over financial reporting at March 31, 2025 based on the criteria established in “Internal Control—Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation, management has concluded that we maintained effective internal control over financial reporting at March 31, 2025.
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The effectiveness of our internal control over financial reporting at March 31, 2025 has been audited by KPMG AZSA, our independent registered public accounting firm, as stated in the “Report of Independent Registered Public Accounting Firm” included in this annual report.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| Item 16A. | Audit Committee Financial Expert |
Our board of directors has determined that Yoriko Goto is an “audit committee financial expert” as defined in Item 16A of Form 20-F and is “independent” as defined in the listing standards of the NYSE.
| Item 16B. | Code of Ethics |
We have adopted a code of ethics, which is comprised of internal rules included in our business ethics and compliance manual, each of which applies to all our directors, officers and other employees.
On April 1, 2025, we revised our previous internal rules and established “Behavioral Guideline on Compliance and Risk,” in order to respond to diversifying expectations from customers and society, as well as the complexities of our own business.
A copy of the sections of our business ethics and compliance manual equivalent to the “code of ethics” (as defined in paragraph (b) of Item 16B of Form 20-F) is attached as Exhibit 11.1 to this annual report.
No waivers of the business ethics and compliance manual have been granted to any of our directors, officers or other employees, during the fiscal year ended March 31, 2025.
| Item 16C. | Principal Accountant Fees and Services |
Fees for Services Provided by KPMG AZSA and its Affiliates
The aggregate fees billed by KPMG AZSA, our independent registered public accounting firm, and its affiliates, for the fiscal years ended March 31, 2025 and 2024 are presented in the following table:
| For the fiscal year ended March 31, |
||||||||
| 2025 | 2024 | |||||||
| (In millions) | ||||||||
| Audit fees(1) |
¥ | 7,343 | ¥ | 6,961 | ||||
| Audit-related fees(2) |
421 | 444 | ||||||
| Tax fees(3) |
55 | 48 | ||||||
| All other fees(4) |
15 | 24 | ||||||
|
|
|
|
|
|||||
| Total |
¥ | 7,834 | ¥ | 7,477 | ||||
|
|
|
|
|
|||||
| (1) | Audit fees primarily include fees for the audit of our and our subsidiaries’ annual financial statements and fees for the services that are normally provided in connection with our statutory and regulatory filings. |
| (2) | Audit-related fees primarily include fees for attestation and related services that are not reported under audit fees. |
| (3) | Tax fees primarily include fees for tax compliance, assistance with preparation of tax return filings and tax advisory services. |
| (4) | All other fees include fees for the assessment of internal controls related to the implementation of systems. |
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Pre-Approval Policies and Procedures
Pursuant to Rule 2-01(c)(7) of Regulation S-X, our audit committee pre-approves all engagements with KPMG AZSA and its affiliates. Under the policies and procedures established by our audit committee, the Company and its subsidiaries must apply to our audit committee for pre-approval on either a periodic basis twice a year for services expected to be performed in the coming months or case-by-case basis before entering into the engagement with KPMG AZSA and its affiliates to perform audit and permitted non-audit services.
Pre-approval is granted by our audit committee prior to entering into the engagement. Additionally, if necessary, full-time audit committee members may consider any case-by-case application for pre-approval on behalf of our audit committee prior to the next scheduled audit committee meeting. Such pre-approvals made by full-time audit committee members are reported to our audit committee at the next scheduled audit committee meeting.
Fees approved pursuant to the procedures described in paragraph 2-01(c)(7)(i)(C) of Regulation S-X, which provides for an exception to the general requirement for pre-approval in certain circumstances, were none for the fiscal years ended March 31, 2025 and 2024.
| Item 16D. | Exemptions from the Listing Standards for the Audit Committee |
Not applicable.
| Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
The following table sets forth purchases of our common stock by us and our affiliated purchasers during the fiscal year ended March 31, 2025:
| Total number of shares purchased(1)(2)(3) |
Average price paid per share(1)(3) |
Total number of shares purchased as part of publicly announced plans or programs(1)(4)(5) |
Maximum number of shares that may yet be purchased under the plans or programs(1)(4)(5) |
|||||||||||||
| April 1 to April 30, 2024 |
6,543 | ¥ | 2,911 | — | — | |||||||||||
| May 1 to May 31, 2024 |
2,433,435 | 3,339 | 2,427,000 | 42,573,000 | ||||||||||||
| June 1 to June 30, 2024 |
13,925,367 | 3,378 | 13,920,900 | 28,652,100 | ||||||||||||
| July 1 to July 31, 2024 |
11,271,570 | 3,650 | 11,263,200 | 17,388,900 | ||||||||||||
| August 1 to August 31, 2024 |
1,077,762 | 3,518 | 1,074,300 | 16,314,600 | ||||||||||||
| September 1 to September 30, 2024 |
4,872 | 3,032 | — | — | ||||||||||||
| October 1 to October 31, 2024 |
2,907 | 3,091 | — | — | ||||||||||||
| November 1 to November 30, 2024 |
8,944,056 | 3,638 | 8,940,600 | 51,059,400 | ||||||||||||
| December 1 to December 31, 2024 |
17,237,383 | 3,744 | 17,234,100 | 33,825,300 | ||||||||||||
| January 1 to January 31, 2025 |
12,822,076 | 3,802 | 12,819,800 | 21,005,500 | ||||||||||||
| February 1 to February 28, 2025 |
1,092,890 | 3,874 | 1,091,600 | 19,913,900 | ||||||||||||
| March 1 to March 31, 2025 |
1,555 | 3,893 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
68,820,416 | ¥ | 3,636 | 68,771,500 | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | As resolved by the board of directors on May 15, 2024, we implemented a stock split of our common stock with an effective date of October 1, 2024, whereby each share of common stock owned by shareholders listed or recorded in the closing register of shareholders on the record date of September 30, 2024 was split into three shares. Number of shares and average price paid per share are calculated based on the assumption that the stock split had been implemented at the beginning of the fiscal year ended March 31, 2025. |
| (2) | A total of 48,916 shares based on the assumption that the stock split had been implemented at the beginning of the fiscal year ended March 31, 2025 were purchased other than through a publicly announced plan or program during the fiscal year ended March 31, 2025, due to our purchases of shares constituting less than one unit from registered holders of such shares at the current market prices of those shares. |
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| (3) | A total of 149,000 shares (447,000 shares based on the assumption that the stock split had been implemented at the beginning of the fiscal year ended March 31, 2025) were purchased by the Employee Stock Ownership Plan (“ESOP”) trust during May 2024. These shares are excluded from the total number of shares purchased and average price paid per share in this table. |
| (4) | On May 15, 2024, we announced that our board of directors resolved to repurchase shares of our common stock and cancel all the repurchased shares. The resolution authorized the repurchase of up to the lesser of (i) an aggregate of 15,000,000 shares (45,000,000 shares based on the assumption that the stock split had been implemented at the beginning of the fiscal year ended March 31, 2025) of our common stock and (ii) an aggregate of ¥100 billion between May 16, 2024 and July 31, 2024. On August 1, 2024, we announced that we completed the repurchase pursuant to the resolution, acquiring 9,561,800 shares (28,685,400 shares based on the assumption that the stock split had been implemented at the beginning of the fiscal year ended March 31, 2025) of our common stock for ¥100 billion in aggregate. We cancelled all of the repurchased shares on August 20, 2024. |
| (5) | On November 14, 2024, we announced that our board of directors resolved to repurchase shares of our common stock and cancel all the repurchased shares. The resolution authorized the repurchase of up to the lesser of (i) an aggregate of 60,000,000 shares of our common stock and (ii) an aggregate of ¥150 billion between November 15, 2024 and January 31, 2025. On February 3, 2025, we announced that we completed the repurchase pursuant to the resolution, acquiring 40,086,100 shares of our common stock for ¥150 billion in aggregate. We cancelled all of the repurchased shares on February 20, 2025. |
On May 14, 2025, we announced that our board of directors resolved to repurchase shares of our common stock and cancel all the repurchased shares. The resolution authorized the repurchase of up to the lesser of (i) an aggregate of 40,000,000 shares of our common stock and (ii) an aggregate of ¥100 billion between May 15, 2025 and July 31, 2025. The cancellation of the repurchased shares is scheduled on August 20, 2025. During May 2025, the Company entered into contracts to repurchase 3,989,800 shares of our common stock for ¥15 billion in aggregate.
| Item 16F. | Change in Registrant’s Certifying Accountant |
None.
| Item 16G. | Corporate Governance |
Companies listed on the NYSE must comply with certain corporate governance standards provided under Section 303A of the NYSE Listed Company Manual. However, NYSE-listed companies that are foreign private issuers, including us, are permitted to follow home country practices in lieu of certain provisions of Section 303A if such foreign private issuers meet certain criteria. We rely on the exemption for home country practices concerning the listing of our ADSs on the NYSE.
Under the Companies Act, we are required to have a corporate governance system with (i) a board of corporate auditors, (ii) an audit and supervisory committee, or (iii) three statutory committees: a nominating committee, an audit committee and a compensation committee. We have adopted a company with three statutory committees system of corporate governance.
Foreign private issuers listed on the NYSE are required to provide to their U.S. investors a brief, general summary of the significant differences of corporate governance practices that differ from U.S. companies under NYSE listing standards. The following is a summary of the significant ways in which our corporate governance practices differ from NYSE standards followed by U.S. companies:
| • | U.S. companies listed on the NYSE are required to have a majority of directors that meet the independence requirements under Section 303A of the NYSE’s Listed Company Manual. Under the Companies Act, we are required to have three statutory committees consisting of members of our board of directors, of which the majority must be outside directors. Currently, seven of our thirteen directors are outside directors who meet the requirements under the Companies Act. |
| • | U.S. companies listed on the NYSE are required to have an audit committee composed entirely of independent directors. Under the Companies Act, we are required to have an audit committee that consists of three or more members of our board of directors, of which the majority must be outside directors. Currently, three of the five members of our audit committee are outside directors that meet the requirements under the Companies Act. Our audit committee satisfies the requirements of Rule 10A-3 under the Exchange Act, including the independence requirements thereunder. |
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| • | A NYSE-listed U.S. company is required to have a nominating/corporate governance committee and a compensation committee, all of which must be composed entirely of independent directors. The members of the compensation committee must satisfy additional requirements set forth in Section 303A.02(a)(ii) of the NYSE Listed Company Manual. A compensation committee must also have the authority to, in its sole discretion, retain or obtain the advice of a compensation consultant, independent legal counsel or other adviser. This authority is subject to the committee’s consideration of certain criteria set forth in Section 303A.05(c) of the NYSE Listed Company Manual regarding the independence of the adviser. Under the Companies Act, we are required to establish a nominating committee and a compensation committee, each of which consists of at least three directors and of which the majority of the members must be outside directors. Currently, three of the four members of our nominating committee and four of the six members of compensation committee are outside directors who meet the requirements under the Companies Act. |
| • | A NYSE-listed U.S. company must adopt a code of business conduct and ethics and must post the code on its website. While we are not required to adopt such code under Japanese law or the rules of stock exchanges in Japan on which we are listed, we maintain our code of conduct and ethics as our standard for corporate conduct to be observed by our directors, officers and employees. |
| • | A NYSE-listed U.S. company must adopt corporate governance guidelines and must post the guidelines on its website. While we are not required to adopt such guidelines under Japanese law, the rules of the stock exchanges in Japan on which we are listed, including the Tokyo Stock Exchange, require listed companies, including us, to comply with the principles of the Corporate Governance Code established by those stock exchanges and, in cases of noncompliance with some or all of the principles, to disclose the reasons for such noncompliance. We established the SMFG Corporate Governance Guideline, in consideration of the Corporate Governance Code, to present our basic views and guidelines on corporate governance and improve our corporate governance system. The SMFG Corporate Governance Guideline is available on our website (the contents of which are not incorporated by reference in this annual report). |
| • | A NYSE-listed U.S. company must hold regularly scheduled executive sessions where participants are limited to non-management directors. While we are not required to hold such sessions under the Companies Act, the SMFG Corporate Governance Guideline provides that our outside directors, who are neither executive directors, executive corporate officers nor employees, will endeavor to exchange information and develop a shared awareness among them regarding matters relating to the corporate governance and business of SMBC Group from an independent and objective standpoint. The SMFG Corporate Governance Guideline further provides, as a concrete way of exchanging information and developing this shared awareness, that outside directors may hold meetings that only outside directors may attend, as necessary. |
| • | A NYSE-listed U.S. company must generally obtain shareholder approval with respect to any equity compensation plan, subject to limited exemptions. Under the Companies Act, companies with three statutory committees such as us are not required to obtain shareholder approval with respect to equity compensation plans. In this case, the compensation committee is required to establish policies in regard to the determination of the compensation of the directors and corporate executive officers, including stock compensation plans that utilize restricted stock, and determines the compensation of the individual directors and corporate executive officers in accordance with such policies. For information on the equity compensation plan introduced by us, refer to “Item 6.E. Share Ownership.” |
| Item 16H. | Mine Safety Disclosure |
Not applicable.
| Item 16I. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
Not applicable.
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Item 16J. |
Insider Trading Policies |
Item 16K. |
Cybersecurity |
Table of Contents
PART III
| Item 17. | Financial Statements |
We have responded to Item 18 in lieu of this item.
| Item 18. | Financial Statements |
The information required by this item is set forth in our consolidated financial statements starting on page F-1 of this annual report.
| Item 19. | Exhibits |
We have filed the following documents as exhibits to this document:
| Exhibit 1.1 | Articles of Incorporation of Sumitomo Mitsui Financial Group, Inc., as amended on October 1, 2024 | |
| Exhibit 1.2 | Regulations of the Board of Directors of Sumitomo Mitsui Financial Group, Inc., as amended on July 28, 2021, incorporated by reference from our registration statement on Form F-3 (Commission file number 333-261754) filed on December 20, 2021 | |
| Exhibit 1.3 | Share Handling Regulations of Sumitomo Mitsui Financial Group, Inc., as amended on September 1, 2022, incorporated by reference from our annual report on Form 20-F (Commission file number 001-34919) filed on June 29, 2023 | |
| Exhibit 1.4 | Compensation Recoupment Policy of Sumitomo Mitsui Financial Group, Inc., adopted on October 24, 2023, incorporated by reference from our annual report on Form 20-F (Commission file number 001-34919) filed on June 27, 2024 | |
| Exhibit 2.1 | Form of Deposit Agreement among the registrant, Citibank, N.A., as Depositary, and all owners and holders from time to time of American Depositary Shares issued thereunder, incorporated by reference from our registration statement on Form 20-F (Commission file number 001-34919) filed on October 20, 2010 | |
| Exhibit 2.2 | Description of our common stock, incorporated by reference from “Item 10.B Memorandum and Articles of Incorporation” of this annual report | |
| Exhibit 2.3 | Description of our American Depositary Shares | |
| Exhibit 2.4 | Form of ADR, incorporated by reference from our prospectus on Form 424B3 (Commission file number 333-170036) filed on October 1, 2024 | |
| Exhibit 8 | List of subsidiaries of Sumitomo Mitsui Financial Group, Inc., at March 31, 2025 | |
| Exhibit 11.1 | Code of Ethics of Sumitomo Mitsui Financial Group, Inc., as amended on April 1, 2025 | |
| Exhibit 11.2 | Insider Trading Policy of Sumitomo Mitsui Financial Group, Inc., as amended on June 1, 2025 | |
| Exhibit 12.1 | CEO Certification Required by Rule 13a-14(a) (17 CFR 240.13a-14(a)) | |
| Exhibit 12.2 | CFO Certification Required by Rule 13a-14(a) (17 CFR 240.13a-14(a)) | |
| Exhibit 13.1 | Certification Required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) | |
| Exhibit 13.2 | Certification Required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) | |
| Exhibit 15.1 | Consent of Independent Registered Public Accounting Firm | |
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| Exhibit 101. INS | Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
| Exhibit 101. SCH | Inline XBRL Taxonomy Extension Schema | |
| Exhibit 101. CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | |
| Exhibit 101. DEF | Inline XBRL Taxonomy Extension Definition Linkbase | |
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| Exhibit 104 | The cover page for the Company’s Annual Report on Form 20-F for the year ended March 31, 2025, has been formatted in Inline XBRL | |
We have not included as exhibits certain instruments with respect to our long-term debt. The total amount of our long-term debt securities or that of our subsidiaries, authorized under any instrument does not exceed 10% of our total assets. We hereby agree to furnish to the SEC, upon its request, a copy of any instrument defining the rights of holders of our long-term debt or that of our subsidiaries for which consolidated or unconsolidated financial statements are required to be filed.
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SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| By: | /s/ Toru Nakashima | |||
| Name: | Toru Nakashima | |||
| Title: | President and Group Chief Executive Officer | |||
Date: June 27, 2025
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Table of Contents
I. |
Distribution of Assets, Liabilities and Equity; Interest Rates and Interest Differential |
For the fiscal year ended March 31, |
||||||||||||||||||||||||||||||||||||
2025 |
2024 |
2023 |
||||||||||||||||||||||||||||||||||
Average balance |
Interest income |
Average rate |
Average balance |
Interest income |
Average rate |
Average balance |
Interest income |
Average rate |
||||||||||||||||||||||||||||
(In millions, except percentages) |
||||||||||||||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||||||||||||||
Interest-earning deposits with banks (1) : |
||||||||||||||||||||||||||||||||||||
Domestic offices |
¥ | 61,132,777 | ¥ | 150,660 | 0.25 | % | ¥ | 27,449,165 | ¥ | 31,499 | 0.11 | % | ¥ | 28,703,195 | ¥ | 34,990 | 0.12 | % | ||||||||||||||||||
Foreign offices |
10,322,330 | 501,381 | 4.86 | % | 11,070,392 | 572,765 | 5.17 | % | 10,400,549 | 300,815 | 2.89 | % | ||||||||||||||||||||||||
Total |
71,455,107 | 652,041 | 0.91 | % | 38,519,557 | 604,264 | 1.57 | % | 39,103,744 | 335,805 | 0.86 | % | ||||||||||||||||||||||||
Call loans and bills bought, reverse repurchase agreements and cash collateral on securities borrowed: |
||||||||||||||||||||||||||||||||||||
Domestic offices |
11,815,659 | 128,943 | 1.09 | % | 11,379,074 | 79,841 | 0.70 | % | 11,158,315 | 27,777 | 0.25 | % | ||||||||||||||||||||||||
Foreign offices |
11,631,865 | 442,859 | 3.81 | % | 8,536,516 | 328,524 | 3.85 | % | 6,192,287 | 102,839 | 1.66 | % | ||||||||||||||||||||||||
Total |
23,447,524 | 571,802 | 2.44 | % | 19,915,590 | 408,365 | 2.05 | % | 17,350,602 | 130,616 | 0.75 | % | ||||||||||||||||||||||||
Trading assets (2) and financial assets at fair value through profit or loss(3) : |
||||||||||||||||||||||||||||||||||||
Domestic offices |
3,822,406 | 20,852 | 0.55 | % | 3,704,566 | 13,848 | 0.37 | % | 3,111,209 | 10,849 | 0.35 | % | ||||||||||||||||||||||||
Foreign offices |
1,279,931 | 54,999 | 4.30 | % | 1,581,322 | 43,199 | 2.73 | % | 841,188 | 26,965 | 3.21 | % | ||||||||||||||||||||||||
Total |
5,102,337 | 75,851 | 1.49 | % | 5,285,888 | 57,047 | 1.08 | % | 3,952,397 | 37,814 | 0.96 | % | ||||||||||||||||||||||||
Investment securities (4) : |
||||||||||||||||||||||||||||||||||||
Domestic offices |
19,139,502 | 300,019 | 1.57 | % | 18,289,128 | 236,610 | 1.29 | % | 18,999,935 | 82,984 | 0.44 | % | ||||||||||||||||||||||||
Foreign offices |
9,152,913 | 325,716 | 3.56 | % | 7,843,093 | 257,098 | 3.28 | % | 6,051,591 | 135,027 | 2.23 | % | ||||||||||||||||||||||||
Total |
28,292,415 | 625,735 | 2.21 | % | 26,132,221 | 493,708 | 1.89 | % | 25,051,526 | 218,011 | 0.87 | % | ||||||||||||||||||||||||
Loans and advances (5) : |
||||||||||||||||||||||||||||||||||||
Domestic offices |
73,086,292 | 1,281,714 | 1.75 | % | 69,795,241 | 1,178,957 | 1.69 | % | 66,849,437 | 976,128 | 1.46 | % | ||||||||||||||||||||||||
Foreign offices |
51,599,922 | 3,585,449 | 6.95 | % | 47,182,431 | 3,259,104 | 6.91 | % | 46,551,468 | 2,035,516 | 4.37 | % | ||||||||||||||||||||||||
Total |
124,686,214 | 4,867,163 | 3.90 | % | 116,977,672 | 4,438,061 | 3.79 | % | 113,400,905 | 3,011,644 | 2.66 | % | ||||||||||||||||||||||||
Total interest-earning assets: |
||||||||||||||||||||||||||||||||||||
Domestic offices |
168,996,636 | 1,882,188 | 1.11 | % | 130,617,174 | 1,540,755 | 1.18 | % | 128,822,091 | 1,132,728 | 0.88 | % | ||||||||||||||||||||||||
Foreign offices |
83,986,961 | 4,910,404 | 5.85 | % | 76,213,754 | 4,460,690 | 5.85 | % | 70,037,083 | 2,601,162 | 3.71 | % | ||||||||||||||||||||||||
Total |
252,983,597 | ¥ | 6,792,592 | 2.68 | % | 206,830,928 | ¥ | 6,001,445 | 2.90 | % | 198,859,174 | ¥ | 3,733,890 | 1.88 | % | |||||||||||||||||||||
Non-interest-earning assets: |
||||||||||||||||||||||||||||||||||||
Cash and due from banks |
9,140,761 | 40,404,409 | 35,397,453 | |||||||||||||||||||||||||||||||||
Other non-interest-earning assets |
31,802,391 | 29,718,916 | 25,340,810 | |||||||||||||||||||||||||||||||||
Allowance for loan losses |
(980,931 | ) | (925,084 | ) | (967,519 | ) | ||||||||||||||||||||||||||||||
Total non-interest-earning assets |
39,962,221 | 69,198,241 | 59,770,744 | |||||||||||||||||||||||||||||||||
Total assets |
¥ | 292,945,818 | ¥ | 276,029,169 | ¥ | 258,629,918 | ||||||||||||||||||||||||||||||
Total assets attributable to foreign offices |
33.3 | % | 32.3 | % | 32.0 | % | ||||||||||||||||||||||||||||||
For the fiscal year ended March 31, |
||||||||||||||||||||||||||||||||||||
2025 |
2024 |
2023 |
||||||||||||||||||||||||||||||||||
Average balance |
Interest expense |
Average rate |
Average balance |
Interest expense |
Average rate |
Average balance |
Interest expense |
Average rate |
||||||||||||||||||||||||||||
(In millions, except percentages) |
||||||||||||||||||||||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||||||||||||||
Deposits: |
||||||||||||||||||||||||||||||||||||
Domestic offices |
¥ | 108,149,837 | ¥ | 326,413 | 0.30% | ¥ | 103,168,004 | ¥ | 217,776 | 0.21% | ¥ | 101,243,116 | ¥ | 99,999 | 0.10% | |||||||||||||||||||||
Foreign offices |
43,249,557 | 1,914,192 | 4.43% | 41,198,120 | 1,955,469 | 4.75% | 38,080,063 | 968,751 | 2.54% | |||||||||||||||||||||||||||
Total |
151,399,394 | 2,240,605 | 1.48% | 144,366,124 | 2,173,245 | 1.51% | 139,323,179 | 1,068,750 | 0.77% | |||||||||||||||||||||||||||
Call money and bills sold, repurchase agreements and cash collateral on securities lent: |
||||||||||||||||||||||||||||||||||||
Domestic offices |
15,175,662 | 400,440 | 2.64% | 12,475,833 | 360,268 | 2.89% | 11,764,350 | 108,498 | 0.92% | |||||||||||||||||||||||||||
Foreign offices |
10,225,014 | 520,983 | 5.10% | 8,390,852 | 448,131 | 5.34% | 7,620,598 | 190,693 | 2.50% | |||||||||||||||||||||||||||
Total |
25,400,676 | 921,423 | 3.63% | 20,866,685 | 808,399 | 3.87% | 19,384,948 | 299,191 | 1.54% | |||||||||||||||||||||||||||
Trading liabilities (2) : |
||||||||||||||||||||||||||||||||||||
Domestic offices |
3,873,821 | 23,529 | 0.61% | 3,259,973 | 18,352 | 0.56% | 2,786,212 | 19,889 | 0.71% | |||||||||||||||||||||||||||
Foreign offices |
720,181 | 31,027 | 4.31% | 578,065 | 20,971 | 3.63% | 314,020 | 8,767 | 2.79% | |||||||||||||||||||||||||||
Total |
4,594,002 | 54,556 | 1.19% | 3,838,038 | 39,323 | 1.02% | 3,100,232 | 28,656 | 0.92% | |||||||||||||||||||||||||||
Financial liabilities designated at fair value through profit or loss (3) : |
||||||||||||||||||||||||||||||||||||
Domestic offices |
274,680 | 1,300 | 0.47% | 171,350 | 313 | 0.18% | 87,941 | 113 | 0.13% | |||||||||||||||||||||||||||
Foreign offices |
255,471 | 3,016 | 1.18% | 211,071 | 1,834 | 0.87% | 246,968 | 477 | 0.19% | |||||||||||||||||||||||||||
Total |
530,151 | 4,316 | 0.81% | 382,421 | 2,147 | 0.56% | 334,909 | 590 | 0.18% | |||||||||||||||||||||||||||
Borrowings and other interest-bearing liabilities: |
||||||||||||||||||||||||||||||||||||
Domestic offices |
15,203,665 | 104,439 | 0.69% | 16,314,414 | 112,145 | 0.69% | 16,888,382 | 67,692 | 0.40% | |||||||||||||||||||||||||||
Foreign offices |
1,601,867 | 105,820 | 6.61% | 1,480,614 | 85,426 | 5.77% | 1,152,211 | 58,928 | 5.11% | |||||||||||||||||||||||||||
Total |
16,805,532 | 210,259 | 1.25% | 17,795,028 | 197,571 | 1.11% | 18,040,593 | 126,620 | 0.70% | |||||||||||||||||||||||||||
Commercial Paper: |
||||||||||||||||||||||||||||||||||||
Domestic offices |
1,155,060 | 3,381 | 0.29% | 1,068,437 | 218 | 0.02% | 707,581 | 37 | 0.01% | |||||||||||||||||||||||||||
Foreign offices |
2,362,170 | 108,967 | 4.61% | 2,244,468 | 114,246 | 5.09% | 2,261,246 | 45,274 | 2.00% | |||||||||||||||||||||||||||
Total |
3,517,230 | 112,348 | 3.19% | 3,312,905 | 114,464 | 3.46% | 2,968,827 | 45,311 | 1.53% | |||||||||||||||||||||||||||
Bonds: |
||||||||||||||||||||||||||||||||||||
Domestic offices |
9,857,998 | 603,829 | 6.13% | 9,293,908 | 609,336 | 6.56% | 8,421,651 | 314,136 | 3.73% | |||||||||||||||||||||||||||
Foreign offices |
282,223 | 21,945 | 7.78% | 198,853 | 16,969 | 8.53% | 303,571 | 13,866 | 4.57% | |||||||||||||||||||||||||||
Total |
10,140,221 | 625,774 | 6.17% | 9,492,761 | 626,305 | 6.60% | 8,725,222 | 328,002 | 3.76% | |||||||||||||||||||||||||||
Premiums for deposit insurance and others: |
||||||||||||||||||||||||||||||||||||
Domestic offices |
— | 28,639 | — | — | 26,579 | — | — | 20,696 | — | |||||||||||||||||||||||||||
Foreign offices |
— | 63,259 | — | — | 107,072 | — | — | 52,436 | — | |||||||||||||||||||||||||||
Total |
— | 91,898 | — | — | 133,651 | — | — | 73,132 | — | |||||||||||||||||||||||||||
Total interest-bearing liabilities: |
||||||||||||||||||||||||||||||||||||
Domestic offices |
153,690,723 | 1,491,970 | 0.97% | 145,751,919 | 1,344,987 | 0.92% | 141,899,233 | 631,060 | 0.44% | |||||||||||||||||||||||||||
Foreign offices |
58,696,483 | 2,769,209 | 4.72% | 54,302,043 | 2,750,118 | 5.06% | 49,978,677 | 1,339,192 | 2.68% | |||||||||||||||||||||||||||
Total |
212,387,206 | ¥ | 4,261,179 | 2.01% | 200,053,962 | ¥ | 4,095,105 | 2.05% | 191,877,910 | ¥ | 1,970,252 | 1.03% | ||||||||||||||||||||||||
Non-interest-bearing liabilities: |
||||||||||||||||||||||||||||||||||||
Non-interest-bearing demand deposits |
34,268,830 | 34,769,805 | 32,230,705 | |||||||||||||||||||||||||||||||||
Other non-interest-bearing liabilities |
29,773,839 | 26,300,081 | 21,254,281 | |||||||||||||||||||||||||||||||||
Total non-interest-bearing liabilities |
64,042,669 | 61,069,886 | 53,484,986 | |||||||||||||||||||||||||||||||||
Total equity |
16,515,943 | 14,905,321 | 13,267,022 | |||||||||||||||||||||||||||||||||
Total equity and liabilities |
¥ | 292,945,818 | ¥ | 276,029,169 | ¥ | 258,629,918 | ||||||||||||||||||||||||||||||
Total liabilities attributable to foreign offices |
25.4 | % | 25.4 | % | 24.4 | % | ||||||||||||||||||||||||||||||
Net interest income and interest rate spread |
¥ | 2,531,413 | 0.67% | ¥ | 1,906,340 | 0.85% | ¥ | 1,763,638 | 0.85% | |||||||||||||||||||||||||||
Net interest income as a percentage of total interest-earning assets |
1.00% | 0.92% | 0.89% | |||||||||||||||||||||||||||||||||
| (1) | From the fiscal year ended March 31, 2025, the compilation method for deposits with the Bank of Japan for “Interest-earning deposits with banks” has been changed due to the rise in the Bank of Japan’s policy interest rate. Comparative amounts have been reclassified to conform to the current presentation. |
| (2) | The net amount of interest income on trading assets and interest expense on trading liabilities is reported as net trading income (loss) in our consolidated income statements. |
| (3) | Interest income and expense on financial assets and liabilities at fair value through profit or loss are reported in net income from financial assets and liabilities at fair value through profit or loss in our consolidated income statements. |
| (4) | Taxable investment securities and non-taxable investment securities are not disclosed separately because the aggregate effect of these average balances and interest income would not be material. In addition, the yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect of such calculation would not be material. |
| (5) | Loans and advances include impaired loans and advances. The amortized portion of net loan origination fees is included in interest income on loans and advances. |
Fiscal year ended March 31, 2025 compared to fiscal year ended March 31, 2024 Increase / (decrease) |
Fiscal year ended March 31, 2024 compared to fiscal year ended March 31, 2023 Increase / (decrease) |
|||||||||||||||||||||||
Volume |
Rate |
Net change |
Volume |
Rate |
Net change |
|||||||||||||||||||
(In millions) |
||||||||||||||||||||||||
Interest income: |
||||||||||||||||||||||||
Interest-earning deposits with banks: |
||||||||||||||||||||||||
Domestic offices |
¥ | 60,200 | ¥ | 58,961 | ¥ | 119,161 | ¥ | (1,462 | ) | ¥ | (2,029 | ) | ¥ | (3,491 | ) | |||||||||
Foreign offices |
(37,446 | ) | (33,938 | ) | (71,384 | ) | 20,511 | 251,439 | 271,950 | |||||||||||||||
Total |
22,754 | 25,023 | 47,777 | 19,049 | 249,410 | 268,459 | ||||||||||||||||||
Call loans and bills bought, reverse repurchase agreements and cash collateral on securities borrowed: |
||||||||||||||||||||||||
Domestic offices |
3,166 | 45,936 | 49,102 | 563 | 51,501 | 52,064 | ||||||||||||||||||
Foreign offices |
117,967 | (3,632 | ) | 114,335 | 50,361 | 175,324 | 225,685 | |||||||||||||||||
Total |
121,133 | 42,304 | 163,437 | 50,924 | 226,825 | 277,749 | ||||||||||||||||||
Trading assets (1) and financial assets at fair value through profit or loss(2) : |
||||||||||||||||||||||||
Domestic offices |
449 | 6,555 | 7,004 | 2,168 | 831 | 2,999 | ||||||||||||||||||
Foreign offices |
(9,406 | ) | 21,206 | 11,800 | 20,722 | (4,488 | ) | 16,234 | ||||||||||||||||
Total |
(8,957 | ) | 27,761 | 18,804 | 22,890 | (3,657 | ) | 19,233 | ||||||||||||||||
Investment securities: |
||||||||||||||||||||||||
Domestic offices |
11,390 | 52,019 | 63,409 | (3,242 | ) | 156,868 | 153,626 | |||||||||||||||||
Foreign offices |
45,389 | 23,229 | 68,618 | 47,212 | 74,859 | 122,071 | ||||||||||||||||||
Total |
56,779 | 75,248 | 132,027 | 43,970 | 231,727 | 275,697 | ||||||||||||||||||
Loans and advances: |
||||||||||||||||||||||||
Domestic offices |
56,745 | 46,012 | 102,757 | 44,490 | 158,339 | 202,829 | ||||||||||||||||||
Foreign offices |
306,913 | 19,432 | 326,345 | 27,938 | 1,195,650 | 1,223,588 | ||||||||||||||||||
Total |
363,658 | 65,444 | 429,102 | 72,428 | 1,353,989 | 1,426,417 | ||||||||||||||||||
Total interest income: |
||||||||||||||||||||||||
Domestic offices |
131,950 | 209,483 | 341,433 | 42,517 | 365,510 | 408,027 | ||||||||||||||||||
Foreign offices |
423,417 | 26,297 | 449,714 | 166,744 | 1,692,784 | 1,859,528 | ||||||||||||||||||
Total |
¥ | 555,367 | ¥ | 235,780 | ¥ | 791,147 | ¥ | 209,261 | ¥ | 2,058,294 | ¥ | 2,267,555 | ||||||||||||
Fiscal year ended March 31, 2025 compared to fiscal year ended March 31, 2024 Increase / (decrease) |
Fiscal year ended March 31, 2024 compared to fiscal year ended March 31, 2023 Increase / (decrease) |
|||||||||||||||||||||||
Volume |
Rate |
Net change |
Volume |
Rate |
Net change |
|||||||||||||||||||
(In millions) |
||||||||||||||||||||||||
Interest expense: |
||||||||||||||||||||||||
Deposits: |
||||||||||||||||||||||||
Domestic offices |
¥ | 10,916 | ¥ | 97,721 | ¥ | 108,637 | ¥ | 1,961 | ¥ | 115,816 | ¥ | 117,777 | ||||||||||||
Foreign offices |
94,653 | (135,930 | ) | (41,277 | ) | 85,126 | 901,592 | 986,718 | ||||||||||||||||
Total |
105,569 | (38,209 | ) | 67,360 | 87,087 | 1,017,408 | 1,104,495 | |||||||||||||||||
Call money and bills sold, repurchase agreements and cash collateral on securities lent: |
||||||||||||||||||||||||
Domestic offices |
73,203 | (33,031 | ) | 40,172 | 6,931 | 244,839 | 251,770 | |||||||||||||||||
Foreign offices |
94,293 | (21,441 | ) | 72,852 | 21,044 | 236,394 | 257,438 | |||||||||||||||||
Total |
167,496 | (54,472 | ) | 113,024 | 27,975 | 481,233 | 509,208 | |||||||||||||||||
Trading liabilities (1) : |
||||||||||||||||||||||||
Domestic offices |
3,646 | 1,531 | 5,177 | 3,047 | (4,584 | ) | (1,537 | ) | ||||||||||||||||
Foreign offices |
5,707 | 4,349 | 10,056 | 9,000 | 3,204 | 12,204 | ||||||||||||||||||
Total |
9,353 | 5,880 | 15,233 | 12,047 | (1,380 | ) | 10,667 | |||||||||||||||||
Financial liabilities designated at fair value through profit or loss (2) : |
||||||||||||||||||||||||
Domestic offices |
268 | 719 | 987 | 138 | 62 | 200 | ||||||||||||||||||
Foreign offices |
437 | 745 | 1,182 | (78 | ) | 1,435 | 1,357 | |||||||||||||||||
Total |
705 | 1,464 | 2,169 | 60 | 1,497 | 1,557 | ||||||||||||||||||
Borrowings and other interest-bearing liabilities: |
||||||||||||||||||||||||
Domestic offices |
(7,664 | ) | (42 | ) | (7,706 | ) | (2,370 | ) | 46,823 | 44,453 | ||||||||||||||
Foreign offices |
7,363 | 13,031 | 20,394 | 18,273 | 8,225 | 26,498 | ||||||||||||||||||
Total |
(301 | ) | 12,989 | 12,688 | 15,903 | 55,048 | 70,951 | |||||||||||||||||
Commercial Paper: |
||||||||||||||||||||||||
Domestic offices |
19 | 3,144 | 3,163 | 48 | 133 | 181 | ||||||||||||||||||
Foreign offices |
5,789 | (11,068 | ) | (5,279 | ) | (338 | ) | 69,310 | 68,972 | |||||||||||||||
Total |
5,808 | (7,924 | ) | (2,116 | ) | (290 | ) | 69,443 | 69,153 | |||||||||||||||
Bonds: |
||||||||||||||||||||||||
Domestic offices |
35,838 | (41,345 | ) | (5,507 | ) | 35,500 | 259,700 | 295,200 | ||||||||||||||||
Foreign offices |
6,595 | (1,619 | ) | 4,976 | (5,966 | ) | 9,069 | 3,103 | ||||||||||||||||
Total |
42,433 | (42,964 | ) | (531 | ) | 29,534 | 268,769 | 298,303 | ||||||||||||||||
Premiums for deposit insurance and others: |
||||||||||||||||||||||||
Domestic offices |
2,060 | — | 2,060 | 5,883 | — | 5,883 | ||||||||||||||||||
Foreign offices |
(43,813 | ) | — | (43,813 | ) | 54,636 | — | 54,636 | ||||||||||||||||
Total |
(41,753 | ) | — | (41,753 | ) | 60,519 | — | 60,519 | ||||||||||||||||
Total interest expense: |
||||||||||||||||||||||||
Domestic offices |
118,286 | 28,697 | 146,983 | 51,138 | 662,789 | 713,927 | ||||||||||||||||||
Foreign offices |
171,024 | (151,933 | ) | 19,091 | 181,697 | 1,229,229 | 1,410,926 | |||||||||||||||||
Total |
¥ | 289,310 | ¥ | (123,236 | ) | ¥ | 166,074 | ¥ | 232,835 | ¥ | 1,892,018 | ¥ | 2,124,853 | |||||||||||
Net interest income: |
||||||||||||||||||||||||
Domestic offices |
¥ | 13,664 | ¥ | 180,786 | ¥ | 194,450 | ¥ | (8,621 | ) | ¥ | (297,279 | ) | ¥ | (305,900 | ) | |||||||||
Foreign offices |
252,393 | 178,230 | 430,623 | (14,953 | ) | 463,555 | 448,602 | |||||||||||||||||
Total |
¥ | 266,057 | ¥ | 359,016 | ¥ | 625,073 | ¥ | (23,574 | ) | ¥ | 166,276 | ¥ | 142,702 | |||||||||||
| (1) | The net amount of interest income on trading assets and interest expense on trading liabilities is reported as net trading income (loss) in our consolidated income statements. |
| (2) | Interest income and expense on financial assets and liabilities at fair value through profit or loss are reported in net income from financial assets and liabilities at fair value through profit or loss in our consolidated income statements. |
II. |
Investments in Debt Securities |
At March 31, 2025 |
||||||||||||||||||||
Not later than one year |
Later than one year and not later than five years |
Later than five years and not later than ten years |
Later than ten years |
Total |
||||||||||||||||
Debt instruments at amortized cost: |
||||||||||||||||||||
Domestic: |
||||||||||||||||||||
Japanese government bonds |
— | 0.21 | % | — | — | 0.21 | % | |||||||||||||
Japanese municipal bonds |
— | 0.23 | % | — | — | 0.23 | % | |||||||||||||
Japanese corporate bonds |
— | 0.38 | % | — | — | 0.38 | % | |||||||||||||
Total domestic |
— | 0.23 | % | — | — | 0.23 | % | |||||||||||||
Foreign: |
||||||||||||||||||||
Bonds issued by governments and official institutions excluding U.S. Treasury and other U.S. government agency bonds |
7.35 | % | 6.57 | % | — | — | 7.02 | % | ||||||||||||
Mortgage-backed securities |
— | 4.74 | % | 4.60 | % | 5.41 | % | 5.27 | % | |||||||||||
Other debt instruments |
6.04 | % | 5.99 | % | — | — | 6.03 | % | ||||||||||||
Total foreign |
7.09 | % | 6.45 | % | 4.60 | % | 5.41 | % | 6.63 | % | ||||||||||
Total |
7.09 | % | 0.89 | % | 4.60 | % | 5.41 | % | 1.85 | % | ||||||||||
Debt instruments at fair value through other comprehensive income: |
||||||||||||||||||||
Domestic: |
||||||||||||||||||||
Japanese government bonds |
0.29 | % | 0.10 | % | 0.02 | % | 0.54 | % | 0.27 | % | ||||||||||
Japanese municipal bonds |
0.02 | % | 0.08 | % | 0.14 | % | 0.16 | % | 0.10 | % | ||||||||||
Japanese corporate bonds |
0.05 | % | 0.10 | % | 0.16 | % | 0.40 | % | 0.26 | % | ||||||||||
Other debt instruments |
0.00 | % | — | — | — | 0.00 | % | |||||||||||||
Total domestic |
0.29 | % | 0.10 | % | 0.14 | % | 0.44 | % | 0.24 | % | ||||||||||
Foreign: |
||||||||||||||||||||
U.S. Treasury and other U.S. government agency bonds |
3.55 | % | 2.71 | % | 1.80 | % | — | 2.72 | % | |||||||||||
Bonds issued by governments and official institutions excluding U.S. Treasury and other U.S. government agency bonds |
1.91 | % | 2.45 | % | 1.79 | % | 0.58 | % | 2.01 | % | ||||||||||
Mortgage-backed securities |
— | 5.36 | % | 4.00 | % | 4.85 | % | 4.85 | % | |||||||||||
Other debt instruments |
2.36 | % | 3.12 | % | — | 1.70 | % | 2.54 | % | |||||||||||
Total foreign |
2.41 | % | 2.66 | % | 1.80 | % | 4.71 | % | 3.00 | % | ||||||||||
Total |
0.90 | % | 2.05 | % | 1.35 | % | 4.28 | % | 1.74 | % | ||||||||||
III. |
Loan Portfolio |
Maturity |
||||||||||||||||||||
Not later than one year |
Later than one year and not later than five years |
Later than five years and not later than fifteen years |
Later than fifteen years |
Total |
||||||||||||||||
(In millions) |
||||||||||||||||||||
Domestic: |
||||||||||||||||||||
Manufacturing |
¥ | 6,438,636 | ¥ | 4,087,455 | ¥ | 1,398,698 | ¥ | 374,514 | ¥ | 12,299,303 | ||||||||||
Agriculture, forestry, fisheries and mining |
89,341 | 148,037 | 16,952 | 490 | 254,820 | |||||||||||||||
Construction |
531,577 | 406,293 | 152,403 | 27,728 | 1,118,001 | |||||||||||||||
Transportation, communications and public enterprises |
2,303,946 | 2,499,089 | 1,580,617 | 411,488 | 6,795,140 | |||||||||||||||
Wholesale and retail |
3,775,779 | 2,007,979 | 508,317 | 121,782 | 6,413,857 | |||||||||||||||
Finance and insurance |
1,925,983 | 1,801,889 | 211,615 | 23,232 | 3,962,719 | |||||||||||||||
Real estate and goods rental and leasing |
3,719,170 | 9,445,999 | 4,244,661 | 734,207 | 18,144,037 | |||||||||||||||
Services |
1,754,639 | 1,970,706 | 1,370,106 | 182,259 | 5,277,710 | |||||||||||||||
Municipalities |
196,233 | 228,933 | 145,175 | 13,409 | 583,750 | |||||||||||||||
Lease financing |
2,123 | 9,927 | 9,104 | — | 21,154 | |||||||||||||||
Consumer |
4,325,249 | 3,617,675 | 3,863,776 | 4,999,807 | 16,806,507 | |||||||||||||||
Others |
1,149,351 | 385,239 | 28,011 | 563 | 1,563,164 | |||||||||||||||
Total domestic |
26,212,027 | 26,609,221 | 13,529,435 | 6,889,479 | 73,240,162 | |||||||||||||||
Foreign: |
||||||||||||||||||||
Public sector |
222,535 | 378,558 | 62,992 | — | 664,085 | |||||||||||||||
Financial institutions |
5,803,009 | 5,067,905 | 1,539,174 | 5,597 | 12,415,685 | |||||||||||||||
Commerce and industry |
12,130,070 | 15,090,280 | 5,109,232 | 352,706 | 32,682,288 | |||||||||||||||
Lease financing |
94,322 | 126,504 | 57,247 | 22,249 | 300,322 | |||||||||||||||
Others |
1,654,814 | 4,347,014 | 1,232,887 | 287,017 | 7,521,732 | |||||||||||||||
Total foreign |
19,904,750 | 25,010,261 | 8,001,532 | 667,569 | 53,584,112 | |||||||||||||||
Total |
¥ | 46,116,777 | ¥ | 51,619,482 | ¥ | 21,530,967 | ¥ | 7,557,048 | ¥ | 126,824,274 | ||||||||||
Predetermined rate |
Floating or adjustable rate |
Total |
||||||||||
(In millions) |
||||||||||||
Domestic: |
||||||||||||
Manufacturing |
¥ | 2,318,127 | ¥ | 3,542,540 | ¥ | 5,860,667 | ||||||
Agriculture, forestry, fisheries and mining |
11,380 | 154,099 | 165,479 | |||||||||
Construction |
180,855 | 405,569 | 586,424 | |||||||||
Transportation, communications and public enterprises |
1,749,599 | 2,741,595 | 4,491,194 | |||||||||
Wholesale and retail |
1,107,867 | 1,530,211 | 2,638,078 | |||||||||
Finance and insurance |
487,792 | 1,548,944 | 2,036,736 | |||||||||
Real estate and goods rental and leasing |
4,976,352 | 9,448,515 | 14,424,867 | |||||||||
Services |
989,590 | 2,533,481 | 3,523,071 | |||||||||
Municipalities |
176,830 | 210,687 | 387,517 | |||||||||
Lease financing |
19,031 | — | 19,031 | |||||||||
Consumer |
3,610,789 | 8,870,469 | 12,481,258 | |||||||||
Others |
338,537 | 75,276 | 413,813 | |||||||||
Total domestic |
15,966,749 | 31,061,386 | 47,028,135 | |||||||||
Foreign: |
||||||||||||
Public sector |
— | 441,550 | 441,550 | |||||||||
Financial institutions |
538,592 | 6,074,084 | 6,612,676 | |||||||||
Commerce and industry |
2,457,039 | 18,095,179 | 20,552,218 | |||||||||
Lease financing |
149,397 | 56,603 | 206,000 | |||||||||
Others |
772,762 | 5,094,156 | 5,866,918 | |||||||||
Total foreign |
3,917,790 | 29,761,572 | 33,679,362 | |||||||||
Total |
¥ | 19,884,539 | ¥ | 60,822,958 | ¥ | 80,707,497 | ||||||
IV. |
Allowance for Credit Losses |
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions, except percentages) |
||||||||||||
Allowance for loan losses |
¥ | 1,102,522 | ¥ | 979,000 | ¥ | 864,114 | ||||||
Gross loans and advances |
¥ | 126,824,274 | ¥ | 123,186,120 | ¥ | 113,143,827 | ||||||
Ratio of allowance for loan losses to loans and advances |
0.87 | % | 0.79 | % | 0.76 | % | ||||||
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions, except percentages) |
||||||||||||
Net charge-offs during the period |
¥ | 246,131 | ¥ | 167,704 | ¥ | 293,336 | ||||||
Average loans outstanding during the period |
¥ | 124,686,214 | ¥ | 116,977,672 | ¥ | 113,400,905 | ||||||
Ratio of net charge-offs to average loans outstanding during the period |
0.20 | % | 0.14 | % | 0.26 | % | ||||||
For the fiscal year ended March 31, |
||||||||||||||||||||||||
2025 |
2024 |
2023 |
||||||||||||||||||||||
Net charge-offs during the period |
Ratio of net charge-offs to average loans outstanding during the period |
Net charge-offs during the period |
Ratio of net charge-offs to average loans outstanding during the period |
Net charge-offs during the period |
Ratio of net charge-offs to average loans outstanding during the period |
|||||||||||||||||||
(In millions, except percentages) |
||||||||||||||||||||||||
Domestic: |
||||||||||||||||||||||||
Manufacturing |
¥ | 1,310 | 0.01 | % | ¥ | 15,594 | 0.14 | % | ¥ | 147,575 | 1.41 | % | ||||||||||||
Agriculture, forestry, fisheries and mining |
190 | 0.08 | % | 284 | 0.10 | % | — | — | % | |||||||||||||||
Construction |
241 | 0.02 | % | 456 | 0.04 | % | 442 | 0.04 | % | |||||||||||||||
Transportation, communications and public enterprises |
5,727 | 0.09 | % | 238 | 0.00 | % | 6,451 | 0.10 | % | |||||||||||||||
Wholesale and retail |
3,125 | 0.05 | % | 3,977 | 0.07 | % | 8,020 | 0.13 | % | |||||||||||||||
Finance and insurance |
12 | 0.00 | % | 175 | 0.01 | % | 5 | 0.00 | % | |||||||||||||||
Real estate and goods rental and leasing |
241 | 0.00 | % | 831 | 0.01 | % | 100 | 0.00 | % | |||||||||||||||
Services |
1,587 | 0.03 | % | 1,827 | 0.04 | % | 3,253 | 0.07 | % | |||||||||||||||
Consumer |
94,856 | 0.57 | % | 90,401 | 0.56 | % | 82,010 | 0.53 | % | |||||||||||||||
Others |
2,125 | 0.10 | % | 1,476 | 0.06 | % | 357 | 0.02 | % | |||||||||||||||
Total domestic |
109,414 | 0.15 | % | 115,259 | 0.17 | % | 248,213 | 0.38 | % | |||||||||||||||
Foreign: |
136,717 | 0.26 | % | 52,445 | 0.11 | % | 45,123 | 0.09 | % | |||||||||||||||
Total |
¥ | 246,131 | 0.20 | % | ¥ | 167,704 | 0.14 | % | ¥ | 293,336 | 0.26 | % | ||||||||||||
V. |
Deposits |
For the fiscal year ended March 31 |
||||||||||||||||||||||||
2025 |
2024 |
2023 |
||||||||||||||||||||||
Average amount |
Average rate |
Average amount |
Average rate |
Average amount |
Average rate |
|||||||||||||||||||
(In millions, except percentages) |
||||||||||||||||||||||||
Domestic offices: |
||||||||||||||||||||||||
Non-interest-bearing demand deposits |
¥ | 31,370,726 | — | ¥ | 32,115,337 | — | ¥ | 29,468,962 | — | |||||||||||||||
Interest-bearing demand deposits |
73,849,363 | 0.08 | % | 71,997,238 | 0.00 | % | 69,154,600 | 0.00 | % | |||||||||||||||
Deposits at notice |
724,117 | 0.08 | % | 817,716 | 0.00 | % | 767,795 | 0.00 | % | |||||||||||||||
Time deposits |
19,939,669 | 0.11 | % | 16,909,290 | 0.03 | % | 17,474,088 | 0.03 | % | |||||||||||||||
Negotiable certificates of deposit |
3,930,138 | 0.19 | % | 4,242,120 | 0.00 | % | 4,626,441 | 0.00 | % | |||||||||||||||
Others |
9,706,550 | 2.47 | % | 9,201,640 | 2.31 | % | 9,220,192 | 1.02 | % | |||||||||||||||
Total domestic offices |
139,520,563 | 135,283,341 | 130,712,078 | |||||||||||||||||||||
Foreign offices: |
||||||||||||||||||||||||
Non-interest-bearing demand deposits |
2,898,104 | — | 2,654,468 | — | 2,761,743 | — | ||||||||||||||||||
Interest-bearing demand deposits |
5,976,481 | 3.66 | % | 5,516,729 | 3.83 | % | 4,957,671 | 1.86 | % | |||||||||||||||
Deposits at notice |
13,835,465 | 4.33 | % | 13,351,934 | 4.69 | % | 13,579,493 | 2.37 | % | |||||||||||||||
Time deposits |
11,892,256 | 4.56 | % | 12,255,976 | 4.87 | % | 9,819,996 | 2.96 | % | |||||||||||||||
Negotiable certificates of deposit |
11,405,766 | 4.84 | % | 9,959,803 | 5.20 | % | 9,501,520 | 2.76 | % | |||||||||||||||
Others |
139,589 | 2.44 | % | 113,678 | 2.26 | % | 221,383 | 0.72 | % | |||||||||||||||
Total foreign offices |
46,147,661 | 43,852,588 | 40,841,806 | |||||||||||||||||||||
Total |
¥ | 185,668,224 | ¥ | 179,135,929 | ¥ | 171,553,884 | ||||||||||||||||||
At March 31, 2025 |
||||||||
Domestic offices |
Foreign offices |
|||||||
(In millions) |
||||||||
Uninsured time deposits: |
||||||||
Not later than three months |
¥ | 7,908,451 | ¥ | 8,698,010 | ||||
Later than three months and not later than six months |
2,100,662 | 1,772,782 | ||||||
Later than six months and not later than one year |
2,331,616 | 1,189,168 | ||||||
Later than one year |
2,510,260 | 789,887 | ||||||
Total (1) |
¥ | 14,850,989 | ¥ | 12,449,847 | ||||
Uninsured negotiable certificates of deposit: |
||||||||
Not later than three months |
¥ | 3,157,679 | ¥ | 8,146,676 | ||||
Later than three months and not later than six months |
923,956 | 3,277,289 | ||||||
Later than six months and not later than one year |
51,660 | 1,027,644 | ||||||
Later than one year |
131,000 | 459,185 | ||||||
Total |
¥ | 4,264,295 | ¥ | 12,910,794 | ||||
| (1) | Time deposits in excess of the Federal Deposit Insurance Corporation insurance limit in U.S. office amounted to ¥2,401 million at March 31, 2025. |
Page |
||||
Report of Independent Registered Public Accounting Firm (Auditor Firm ID: |
F-3 |
|||
Consolidated Financial Statements |
F-8 |
|||
Consolidated Statements of Financial Position at March 31, 2025 and 2024 |
F-8 |
|||
Consolidated Income Statements for the Fiscal Years Ended March 31, 2025, 2024 and 2023 |
F-9 |
|||
Consolidated Statements of Comprehensive Income for the Fiscal Years Ended March 31, 2025, 2024 and 2023 |
F-10 |
|||
Consolidated Statements of Changes in Equity for the Fiscal Years Ended March 31, 2025, 2024 and 2023 |
F-11 |
|||
Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31, 2025, 2024 and 2023 |
F-13 |
|||
Notes to Consolidated Financial Statements |
F-14 |
|||
1 General Information |
F-14 |
|||
2 Summary of Material Accounting Policies |
F-14 |
|||
3 Critical Accounting Estimates and Judgments |
F-33 |
|||
4 Segment Analysis |
F-39 |
|||
5 Cash and Deposits with Banks |
F-43 |
|||
6 Trading Assets |
F-44 |
|||
7 Derivative Financial Instruments and Hedge Accounting |
F-44 |
|||
8 Financial Assets at Fair Value Through Profit or Loss |
F-51 |
|||
9 Investment Securities |
F-52 |
|||
10 Loans and Advances |
F-55 |
|||
11 Investments in Associates and Joint Ventures |
F-56 |
|||
12 Property, Plant and Equipment |
F-57 |
|||
13 Leases |
F-58 |
|||
14 Intangible Assets |
F-60 |
|||
15 Other Assets |
F-63 |
|||
16 Deposits |
F-63 |
|||
17 Trading Liabilities |
F-64 |
|||
18 Financial Liabilities Designated at Fair Value Through Profit or Loss |
F-64 |
|||
19 Borrowings |
F-64 |
|||
20 Debt Securities in Issue |
F-65 |
|||
21 Provisions |
F-66 |
|||
22 Other Liabilities |
F-67 |
|||
23 Deferred Income Tax |
F-68 |
|||
24 Retirement Benefits |
F-70 |
|||
25 Shareholders’ Equity |
F-75 |
|||
26 Equity Attributable to Other Equity Instruments Holders |
F-79 |
|||
27 Net Interest Income |
F-80 |
|||
28 Net Fee and Commission Income |
F-81 |
|||
29 Net Trading Income |
F-81 |
|||
30 Net Income from Financial Assets and liabilities at Fair Value Through Profit or Loss |
F-82 |
|||
31 Net Investment Income |
F-82 |
|||
32 Net Gains(losses) Arising From Derecognition of Financial Assets at Amortized Cost |
F-83 | |||
33 Other Income |
F-83 |
|||
34 Impairment Charges on Financial Assets |
F-83 |
|||
35 General and Administrative Expenses |
F-84 |
|||
Page |
||||
36 Other Expenses |
F-84 |
|||
37 Income Tax Expense |
F-85 |
|||
38 Earnings Per Share |
F-86 |
|||
39 Transfers of Financial Assets |
F-86 |
|||
40 Assets Pledged and Received as Collateral |
F-88 |
|||
41 Share-Based Payment |
F-89 |
|||
42 Dividends Per Share |
F-91 | |||
43 Contingency and Capital Commitments |
F-92 |
|||
44 Analysis of Financial Assets and Liabilities by Measurement Basis |
F-92 |
|||
45 Fair Value of Financial Assets and Liabilities |
F-94 |
|||
46 Offsetting of Financial Assets and Liabilities |
F-108 |
|||
47 Financial Risk Management |
F-109 |
|||
48 Related-Party Transactions |
F-133 |
|||
49 Principal Subsidiaries |
F-134 |
|||
50 Structured Entities |
F-136 |
|||
51 Acquisitions |
F-138 |
|||
52 Current and Non-Current Distinction |
F-139 |
|||
53 Condensed Financial Information of Registrant (SMFG) |
F-140 |
|||
| • | the qualitative assessment of the obligor grading, including the assessment of obligor-specific forward-looking information |
| • | the models and key assumptions to incorporate macroeconomic factors |
| • | the methodologies and key assumptions underlying the adjustments to incorporate portfolio-specific risk factors |
| • | the key assumptions underlying the discounted cash flow projections for the DCF method. |
| • | evaluation of the individual obligor grading, including the qualitative assessment of obligor-specific forward-looking information |
| • | evaluation of the models and key assumptions used to incorporate macroeconomic factors |
| • | evaluation of the methodologies and key assumptions underlying the adjustments to incorporate portfolio-specific risk factors |
| • | evaluation of the key assumptions underlying the discounted cash flow projections for the DCF method. |
• |
analyzing the customers’ current business performance and liquidity positions |
• |
assessing the feasibility of the customers’ business performance projections, through (i) comparing the underlying assumptions with available external information regarding the industry outlook, (ii) evaluating the reasonableness of the stress cases considered, and (iii) reviewing the current progress against the projections |
• |
analyzing the impact of economic sanctions targeting Russia and the countermeasures implemented by the Russian government on the customers’ repayment capacity and financial conditions, through the analysis of the current repayment situation |
• |
evaluating the methodologies to incorporate portfolio-specific risk factors by assessing the reasonableness of the methodologies through comparing them to peer bank information and also analyzing the result of a retrospective review |
• |
assessing the appropriateness of certain assumptions through analyzing industry-specific economic trends by comparing them with available external information. |
• |
cumulative results of the audit procedures |
• |
qualitative aspects of SMBC’s accounting practices |
• |
potential bias in the accounting estimates. |
At March 31, |
||||||||||||
Note |
2025 |
2024 |
||||||||||
(In millions) |
||||||||||||
Assets: |
||||||||||||
Cash and deposits with banks |
5 | ¥ | ¥ | |||||||||
Call loans and bills bought |
||||||||||||
Reverse repurchase agreements and cash collateral on securities borrowed |
||||||||||||
Trading assets |
6 | |||||||||||
Derivative financial instruments |
7 | |||||||||||
Financial assets at fair value through profit or loss |
8 | |||||||||||
Investment securities |
9 | |||||||||||
Loans and advances |
10 | |||||||||||
Investments in associates and joint ventures |
11 | |||||||||||
Property, plant and equipment |
12 | |||||||||||
Intangible assets |
14 | |||||||||||
Other assets |
15 | |||||||||||
Current tax assets |
||||||||||||
Deferred tax assets |
23 | |||||||||||
Total assets |
¥ | ¥ | ||||||||||
Liabilities: |
||||||||||||
Deposits |
16 | ¥ | ¥ | |||||||||
Call money and bills sold |
||||||||||||
Repurchase agreements and cash collateral on securities lent |
||||||||||||
Trading liabilities |
17 | |||||||||||
Derivative financial instruments |
7 | |||||||||||
Financial liabilities designated at fair value through profit or loss |
18 | |||||||||||
Borrowings |
19 | |||||||||||
Debt securities in issue |
20 | |||||||||||
Provisions |
21 | |||||||||||
Other liabilities |
22 | |||||||||||
Current tax liabilities |
||||||||||||
Deferred tax liabilities |
23 | |||||||||||
Total liabilities |
||||||||||||
Equity: |
||||||||||||
Capital stock |
25 | |||||||||||
Capital surplus |
25 | |||||||||||
Retained earnings |
25 | |||||||||||
Treasury stock |
25 | ( |
) | ( |
) | |||||||
Equity excluding other reserves |
||||||||||||
Other reserves |
25 | |||||||||||
Equity attributable to shareholders of Sumitomo Mitsui Financial Group, Inc. |
||||||||||||
Non-controlling interests |
||||||||||||
Equity attributable to other equity instruments holders |
26 | |||||||||||
Total equity |
||||||||||||
Total equity and liabilities |
¥ | ¥ | ||||||||||
For the fiscal year ended March 31, |
||||||||||||||||
Note |
2025 |
2024 |
2023 |
|||||||||||||
(In millions, except per share data) |
||||||||||||||||
Interest income |
¥ | ¥ | ¥ | |||||||||||||
Interest expense |
||||||||||||||||
Net interest income |
27 | |||||||||||||||
Fee and commission income |
||||||||||||||||
Fee and commission expense |
||||||||||||||||
Net fee and commission income |
28 | |||||||||||||||
Net trading income (loss) |
29 | ( |
) | |||||||||||||
Net income from financial assets and liabilities at fair value through profit or loss |
30 | |||||||||||||||
Net investment income |
31 | |||||||||||||||
Net gains (losses) arising from derecognition of financial assets at amortized cost (1) |
32 | ( |
) | ( |
) | |||||||||||
Other income (1) |
33 | |||||||||||||||
Total operating income (1) |
||||||||||||||||
Impairment charges on financial assets |
34 | |||||||||||||||
Net operating income (1) |
||||||||||||||||
General and administrative expenses |
35 | |||||||||||||||
Other expenses (1) |
36 | |||||||||||||||
Operating expenses (1) |
||||||||||||||||
Share of post-tax profit of associates and joint ventures |
||||||||||||||||
Profit before tax |
||||||||||||||||
Income tax expense |
37 | |||||||||||||||
Net profit |
¥ | ¥ | ¥ | |||||||||||||
Profit attributable to: |
||||||||||||||||
Shareholders of Sumitomo Mitsui Financial Group, Inc. |
¥ | ¥ | ¥ | |||||||||||||
Non-controlling interests |
||||||||||||||||
Other equity instruments holders |
||||||||||||||||
Earnings per share (2) : |
||||||||||||||||
Basic |
38 | ¥ | ¥ | ¥ | ||||||||||||
Diluted |
38 | |||||||||||||||
| (1) | For the fiscal year ended March 31, 2025, the Group presented “Net gains (losses) arising from derecognition of financial assets at amortized cost” as a separate line item in the consolidated income statements. This line item was not presented separately in prior years but was included within “Other income” and “Other expenses.” The comparative amounts have been restated to conform to the current presentation. |
| (2) | As resolved by the board of directors on May 15, 2024, the Company implemented a stock split of its common stock with an effective date of October 1, 2024, whereby each share of common stock owned by shareholders listed or recorded in the closing register of shareholders on the record date of September 30, 2024 was split into three shares. Basic and diluted earnings per share are calculated based on the assumption that the stock split had been implemented at the beginning of the fiscal year ended March 31, 2023. |
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
Net profit |
¥ | ¥ | ¥ | |||||||||
Other comprehensive income: |
||||||||||||
Items that will not be reclassified to profit or loss: |
||||||||||||
Remeasurements of defined benefit plans: |
||||||||||||
Gains (losses) arising during the period, before tax |
( |
) | ||||||||||
Equity instruments at fair value through other comprehensive income: |
||||||||||||
Gains (losses) arising during the period, before tax |
( |
) | ||||||||||
Own credit on financial liabilities designated at fair value through profit or loss: |
||||||||||||
Gains (losses) arising during the period, before tax |
( |
) | ||||||||||
Share of other comprehensive income (loss) of associates and joint ventures |
( |
) | ( |
) | ( |
) | ||||||
Income tax relating to items that will not be reclassified |
( |
) | ( |
) | ||||||||
Total items that will not be reclassified to profit or loss, net of tax |
( |
) | ||||||||||
Items that may be reclassified subsequently to profit or loss: |
||||||||||||
Debt instruments at fair value through other comprehensive income: |
||||||||||||
Gains (losses) arising during the period, before tax |
( |
) | ( |
) | ||||||||
Reclassification adjustments for (gains) losses included in net profit, before tax |
||||||||||||
Exchange differences on translating foreign operations: |
||||||||||||
Gains (losses) arising during the period, before tax |
( |
) | ||||||||||
Reclassification adjustments for (gains) losses included in net profit, before tax |
( |
) | ( |
) | ||||||||
Share of other comprehensive income (loss) of associates and joint ventures |
||||||||||||
Income tax relating to items that may be reclassified |
( |
) | ||||||||||
Total items that may be reclassified subsequently to profit or loss, net of tax |
||||||||||||
Other comprehensive income (loss), net of tax |
( |
) | ||||||||||
Total comprehensive income |
¥ | ¥ | ¥ | |||||||||
Total comprehensive income attributable to: |
||||||||||||
Shareholders of Sumitomo Mitsui Financial Group, Inc. |
¥ | ¥ | ¥ | |||||||||
Non-controlling interests |
||||||||||||
Other equity instruments holders |
||||||||||||
Equity excluding other reserves |
Other reserves |
|||||||||||||||||||||||||||||||||||||||||||||||
Capital stock |
Capital surplus |
Retained earnings |
Treasury stock |
Remeasure- ments of defined benefit plans reserve |
Financial instruments at fair value through other comprehensive income reserve |
Own credit on financial liabilities designated at fair value through profit or loss reserve |
Exchange differences on translating foreign operations reserve |
Equity attributable to SMFG’s shareholders |
Non- controlling interests |
Equity attributable to other equity instruments holders |
Total equity |
|||||||||||||||||||||||||||||||||||||
(In millions) |
||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at April 1, 2022 |
¥ | ¥ | ¥ | ¥ | ( |
) | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Comprehensive income: |
||||||||||||||||||||||||||||||||||||||||||||||||
| Net profit |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income |
— | — | — | — | ( |
) | — | |||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total comprehensive income |
— | — | — | ( |
) | |||||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Issuance of shares under share-based payment transactions |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Issuance of other equity instruments |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Acquisition and disposal of subsidiaries and businesses-net |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Transaction with non-controlling interest shareholders |
— | ( |
) | — | — | — | — | — | — | ( |
) | — | ||||||||||||||||||||||||||||||||||||
| Dividends to shareholders |
— | — | ( |
) | — | — | — | — | — | ( |
) | ( |
) | — | ( |
) | ||||||||||||||||||||||||||||||||
| Coupons on other equity instruments |
— | — | — | — | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||
| Redemption of other equity instruments |
— | ( |
) | — | — | — | — | — | — | ( |
) | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Purchases of other equity instruments and sales of other equity instruments-net |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Purchases of treasury stock |
— | — | — | ( |
) | — | — | — | — | ( |
) | — | — | ( |
) | |||||||||||||||||||||||||||||||||
| Sales of treasury stock |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Loss on sales of treasury stock |
— | — | ( |
) | — | — | — | — | — | ( |
) | — | — | ( |
) | |||||||||||||||||||||||||||||||||
| Share-based payment transactions |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Transfer from other reserves to retained earnings |
— | — | — | ( |
) | ( |
) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Others |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Balance at March 31, 2023 |
¥ | ¥ | ¥ | ¥ | ( |
) | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Comprehensive income: |
||||||||||||||||||||||||||||||||||||||||||||||||
| Net profit |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income |
— | — | — | — | ( |
) | — | |||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total comprehensive income |
— | — | — | ( |
) | |||||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Issuance of shares under share-based payment transactions |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Issuance of other equity instruments |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Acquisition and disposal of subsidiaries and businesses-net |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Transaction with non-controlling interest shareholders |
— | ( |
) | — | — | — | — | — | — | ( |
) | ( |
) | — | ( |
) | ||||||||||||||||||||||||||||||||
| Dividends to shareholders |
— | — | ( |
) | — | — | — | — | — | ( |
) | ( |
) | — | ( |
) | ||||||||||||||||||||||||||||||||
| Coupons on other equity instruments |
— | — | — | — | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||
| Purchases of other equity instruments and sales of other equity instruments-net |
— | — | — | — | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||
| Purchases of treasury stock |
— | — | — | ( |
) | — | — | — | — | ( |
) | — | — | ( |
) | |||||||||||||||||||||||||||||||||
| Sales of treasury stock |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Loss on sales of treasury stock |
— | — | ( |
) | — | — | — | — | — | ( |
) | — | — | ( |
) | |||||||||||||||||||||||||||||||||
| Cancellation of treasury stock |
— | — | ( |
) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Share-based payment transactions |
— | ( |
) | — | — | — | — | — | — | ( |
) | — | — | ( |
) | |||||||||||||||||||||||||||||||||
| Transfer from other reserves to retained earnings |
— | — | — | ( |
) | ( |
) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Put options written on non-controlling interests |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Others |
— | ( |
) | ( |
) | — | — | — | — | — | ( |
) | — | |||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Balance at March 31, 2024 |
¥ | ¥ | ¥ | ¥ | ( |
) | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Equity excluding other reserves |
Other reserves |
|||||||||||||||||||||||||||||||||||||||||||||||
Capital stock |
Capital surplus |
Retained earnings |
Treasury stock |
Remeasure- ments of defined benefit plans reserve |
Financial instruments at fair value through other comprehensive income reserve |
Own credit on financial liabilities designated at fair value through profit or loss reserve |
Exchange differences on translating foreign operations reserve |
Equity attributable to SMFG’s shareholders |
Non- controlling interests |
Equity attributable to other equity instruments holders |
Total equity |
|||||||||||||||||||||||||||||||||||||
(In millions) |
||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2024 |
¥ | ¥ | ¥ | ¥ | ( |
) | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ||||||||||||||||||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||||||||||||||||||||||
Net profit |
— |
— | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Other comprehensive income |
— | — | — | — | ( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||||||||||||||||
Total comprehensive income |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||||||
Issuance of shares under share-based payment transactions |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Issuance of other equity instruments |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
Acquisition and disposal of subsidiaries and businesses-net |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
Transaction with non-controlling interest shareholders |
— | ( |
) | — | — | — | — | — | — | ( |
) | — | — | |||||||||||||||||||||||||||||||||||
Dividends to shareholders |
— | — | ( |
) | — | — | — | — | — | ( |
) | ( |
) | — | ( |
) | ||||||||||||||||||||||||||||||||
Coupons on other equity instruments |
— | — | — | — | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||
Purchases of other equity instruments and sales of other equity instruments-net |
— | — | — | — | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||
Purchases of treasury stock |
— | — | — | ( |
) | — | — | — | — | ( |
) | — | — | ( |
) | |||||||||||||||||||||||||||||||||
Sales of treasury stock |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Loss on sales of treasury stock |
— | — | ( |
) | — | — | — | — | — | ( |
) | — | — | ( |
) | |||||||||||||||||||||||||||||||||
Cancellation of treasury stock |
— | — | ( |
) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Share-based payment transactions |
— | ( |
) | — | — | — | — | — | — | ( |
) | — | — | ( |
) | |||||||||||||||||||||||||||||||||
Transfer from other reserves to retained earnings |
— | — | — | ( |
) | ( |
) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Others |
— | ( |
) | ( |
) | — | — | — | — | — | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||||||||||||
Balance at March 31, 2025 |
¥ | ¥ | ¥ | ¥ | ( |
) | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ||||||||||||||||||||||||||||||||||
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
| Operating Activities: |
||||||||||||
| Profit before tax |
¥ | ¥ | ¥ | |||||||||
| Adjustments for: |
||||||||||||
| (Gains) losses on financial assets at fair value through profit or loss and investment securities |
( |
) | ||||||||||
| Foreign exchange gains |
( |
) | ( |
) | ( |
) | ||||||
| Provision for loan losses |
||||||||||||
| Depreciation and amortization |
||||||||||||
| Share of post-tax profit of associates and joint ventures |
( |
) | ( |
) | ( |
) | ||||||
| Net changes in assets and liabilities: |
||||||||||||
| Net (increase) decrease of term deposits with original maturities over three months |
( |
) | ||||||||||
| Net (increase) decrease of call loans and bills bought |
( |
) | ||||||||||
| Net (increase) decrease of reverse repurchase agreements and cash collateral on securities borrowed |
( |
) | ( |
) | ||||||||
| Net increase of loans and advances |
( |
) | ( |
) | ( |
) | ||||||
| Net change of trading assets and liabilities, derivative financial instruments, and financial liabilities designated at fair value through profit or loss |
( |
) | ||||||||||
| Net increase of deposits |
||||||||||||
| Net increase of call money and bills sold |
||||||||||||
| Net increase (decrease) of repurchase agreements and cash collateral on securities lent |
( |
) | ||||||||||
| Net increase (decrease) of other unsubordinated borrowings and debt securities in issue |
( |
) | ( |
) | ||||||||
| Income taxes paid—net |
( |
) | ( |
) | ( |
) | ||||||
| Other operating activities—net |
( |
) | ||||||||||
| |
|
|
|
|
|
|||||||
| Net cash and cash equivalents provided by (used in) operating activities |
( |
) | ||||||||||
| |
|
|
|
|
|
|||||||
| Investing Activities: |
||||||||||||
| Purchases of financial assets at fair value through profit or loss and investment securities |
( |
) | ( |
) | ( |
) | ||||||
| Proceeds from sales of financial assets at fair value through profit or loss and investment securities |
||||||||||||
| Proceeds from maturities of financial assets at fair value through profit or loss and investment securities |
||||||||||||
| Acquisitions of subsidiaries and businesses, net of cash and cash equivalents acquired |
( |
) | ( |
) | — | |||||||
| Disposal of subsidiaries and businesses, net of cash and cash equivalents disposed |
— | |||||||||||
| Investments in associates and joint ventures |
( |
) | ( |
) | ( |
) | ||||||
| Proceeds from sales of investments in associates and joint ventures |
||||||||||||
| Purchases of property, plant and equipment |
( |
) | ( |
) | ( |
) | ||||||
| Purchases of intangible assets |
( |
) | ( |
) | ( |
) | ||||||
| Proceeds from sales of property, plant and equipment |
||||||||||||
| Other investing activities—net |
( |
) | ( |
) | ( |
) | ||||||
| |
|
|
|
|
|
|||||||
| Net cash and cash equivalents provided by (used in) investing activities |
( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|||||||
| Financing Activities: |
||||||||||||
| Redemption of subordinated borrowings |
( |
) | ( |
) | ( |
) | ||||||
| Proceeds from issuance of subordinated bonds |
||||||||||||
| Redemption of subordinated bonds |
( |
) | — | — | ||||||||
| Payments for the principal portion of lease liabilities |
( |
) | ( |
) | ( |
) | ||||||
| Proceeds from issuance of other equity instruments |
||||||||||||
| Redemption of other equity instruments |
— | — | ( |
) | ||||||||
| Dividends paid to shareholders of Sumitomo Mitsui Financial Group, Inc. |
( |
) | ( |
) | ( |
) | ||||||
| Dividends paid to non-controlling interest shareholders |
( |
) | ( |
) | ( |
) | ||||||
| Coupons paid to other equity instruments holders |
( |
) | ( |
) | ( |
) | ||||||
| Purchases of treasury stock and proceeds from sales of treasury stock—net |
( |
) | ( |
) | ( |
) | ||||||
| Purchases of other equity instruments and proceeds from sales of other equity instruments—net |
( |
) | ( |
) | ||||||||
| Transactions with non-controlling interest shareholders—net |
— | ( |
) | |||||||||
| |
|
|
|
|
|
|||||||
| Net cash and cash equivalents provided by (used in) financing activities |
( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|||||||
| Effect of exchange rate changes on cash and cash equivalents |
( |
) | ||||||||||
| |
|
|
|
|
|
|||||||
| Net increase (decrease) of cash and cash equivalents |
( |
) | ||||||||||
| Cash and cash equivalents at beginning of period |
||||||||||||
| |
|
|
|
|
|
|||||||
| Cash and cash equivalents at end of period |
¥ | ¥ | ¥ | |||||||||
| |
|
|
|
|
|
|||||||
| Net cash and cash equivalents provided by (used in) operating activities includes: |
||||||||||||
| Interest and dividends received |
¥ | ¥ | ¥ | |||||||||
| Interest paid |
||||||||||||
1 |
GENERAL INFORMATION |
2 |
SUMMARY OF MATERIAL ACCOUNTING POLICIES |
| • | trading assets and liabilities are measured at fair value; |
| • | derivative financial instruments are measured at fair value; |
| • | financial assets and liabilities at fair value through profit or loss are measured at fair value; |
| • | investment securities at fair value through other comprehensive income are measured at fair value; and |
| • | liabilities and the assets recognized in consolidated statements of financial position in respect of defined benefit plans are the present value of the defined benefit obligation less the fair value of plan assets. |
| • | The designation eliminates or significantly reduces a measurement or recognition inconsistency (referred to as “an accounting mismatch”) that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases; |
| • | A group of financial liabilities or financial assets and financial liabilities is managed, and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the board of directors; or |
| • | The financial liability contains one or more embedded derivatives which significantly modify the cash flows and it is not clear with no analysis that separation is prohibited. |
| • | significant financial difficulty of an issuer or a borrower; |
| • | a default or delinquency as more than |
| • | restructuring of a financial asset by the Group due to the borrower’s financial difficulties; |
| • | indications that a borrower or issuer will enter bankruptcy; and |
| • | the disappearance of an active market for that financial asset because of the borrower’s financial difficulties. |
| • | Buildings: |
| • | Right of use assets: the shorter of the lease term and the estimated useful life, which is generally |
| • | Assets for rent and others: |
3 |
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS |
| • | qualitative assessment in determining obligor grades; |
| • | determining criteria for a significant increase in credit risk since initial recognition; |
| • | measuring ECL by choosing appropriate models and assumptions; |
| • | incorporating forward-looking information into the ECL measurement by obligor grading, forecast range of macroeconomic scenarios, and additional ECL adjustments if the current circumstances, events or conditions at relevant portfolio level are not fully reflected in the ECL model; and |
| • | estimating the expected future cash flows by taking into account factors such as historical loss information, the appropriateness of the borrower’s business plan or operational improvement plan, the status of progress of its plan, the overall support from financial institutions, and the realizable value of any collateral held. |
For the fiscal year ending March 31, |
||||||||
As at March 31, 2025: |
2026 |
2027 |
||||||
Upside |
(%) |
|||||||
Japanese GDP (Nominal) |
||||||||
U.S. GDP (Real) |
||||||||
EMU GDP (Real) |
||||||||
Asia-Pacific GDP (Real) |
||||||||
Japanese short-term interest rate |
||||||||
Base |
||||||||
Japanese GDP (Nominal) |
||||||||
U.S. GDP (Real) |
||||||||
EMU GDP (Real) |
||||||||
Asia-Pacific GDP (Real) |
||||||||
Japanese short-term interest rate |
||||||||
Downside |
||||||||
Japanese GDP (Nominal) |
||||||||
U.S. GDP (Real) |
||||||||
EMU GDP (Real) |
( |
) | ( |
) | ||||
Asia-Pacific GDP (Real) |
||||||||
Japanese short-term interest rate |
||||||||
Severe downside |
||||||||
Japanese GDP (Nominal) |
( |
) | ||||||
U.S. GDP (Real) |
( |
) | ( |
) | ||||
EMU GDP (Real) |
( |
) | ( |
) | ||||
Asia-Pacific GDP (Real) |
||||||||
Japanese short-term interest rate |
||||||||
For the fiscal year ending March 31, |
||||||||
As at March 31, 2024: |
2025 |
2026 |
||||||
| Upside |
(%) |
|||||||
| Japanese GDP (Nominal) |
||||||||
| US GDP (Real) |
||||||||
| EMU GDP (Real) |
||||||||
| Asia-Pacific GDP (Real) |
||||||||
| Japanese short-term interest rate |
||||||||
| |
|
|
|
|||||
| Base |
||||||||
| Japanese GDP (Nominal) |
||||||||
| US GDP (Real) |
||||||||
| EMU GDP (Real) |
||||||||
| Asia-Pacific GDP (Real) |
||||||||
| Japanese short-term interest rate |
||||||||
| |
|
|
|
|||||
| Downside |
||||||||
| Japanese GDP (Nominal) |
||||||||
| US GDP (Real) |
( |
) | ||||||
| EMU GDP (Real) |
( |
) | ||||||
| Asia-Pacific GDP (Real) |
||||||||
| Japanese short-term interest rate |
||||||||
| |
|
|
|
|||||
| Severe downside |
||||||||
| Japanese GDP (Nominal) |
||||||||
| US GDP (Real) |
( |
) | ||||||
| EMU GDP (Real) |
( |
) | ||||||
| Asia-Pacific GDP (Real) |
||||||||
| Japanese short-term interest rate |
||||||||
| |
|
|
|
|||||
Upside |
Base |
Downside |
Severe downside |
|||||||||||||
(%) |
||||||||||||||||
| As at March 31, 2025: |
||||||||||||||||
| Scenario probability weighting |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
Upside |
Base |
Downside |
Severe downside |
|||||||||||||
(%) |
||||||||||||||||
| As at March 31, 2024: |
||||||||||||||||
| Scenario probability weighting |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
4 |
SEGMENT ANALYSIS |
Wholesale Business Unit |
Retail Business Unit |
Global Business Unit |
Global Markets Business Unit |
Head office account and others |
Total |
|||||||||||||||||||
(In billions) |
||||||||||||||||||||||||
Consolidated gross profit (1) |
¥ | ¥ | ¥ | ¥ | ¥ | ( |
) | ¥ | ||||||||||||||||
General and administrative expenses |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
Others (2) |
( |
) | ( |
) | ||||||||||||||||||||
Consolidated net business profit |
¥ | ¥ | ¥ | ¥ | ¥ | ( |
) | ¥ | ||||||||||||||||
Wholesale Business Unit |
Retail Business Unit |
Global Business Unit |
Global Markets Business Unit |
Head office account and others |
Total |
|||||||||||||||||||
(In billions) |
||||||||||||||||||||||||
Consolidated gross profit (1) |
¥ | ¥ | ¥ | ¥ | ¥ | ( |
) | ¥ | ||||||||||||||||
General and administrative expenses |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
Others (2) |
( |
) | ||||||||||||||||||||||
Consolidated net business profit |
¥ | ¥ | ¥ | ¥ | ¥ | ( |
) | ¥ | ||||||||||||||||
Wholesale Business Unit |
Retail Business Unit |
Global Business Unit |
Global Markets Business Unit |
Head office account and others |
Total |
|||||||||||||||||||
(In billions) |
||||||||||||||||||||||||
Consolidated gross profit (1) |
¥ | ¥ | |
¥ | ¥ | ¥ | ( |
) | ¥ | |||||||||||||||
General and administrative expenses |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
Others (2) |
( |
) | ||||||||||||||||||||||
Consolidated net business profit |
¥ | ¥ | ¥ | ¥ | ¥ | ( |
) | ¥ | ||||||||||||||||
| (1) | Consolidated gross profit = (Interest income – Interest expenses) + Trust fees + (Fee and commission income – Fee and commission expenses) + (Trading income – Trading losses) + (Other operating income – Other operating expenses). |
| (2) | “Others” includes share of profit or loss of equity-method associates and joint ventures and cooperated profit and loss, that is, profit and loss double counted within the Group’s business segments in the managerial accounting. |
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In billions) |
||||||||||||
Consolidated net business profit |
¥ | ¥ | ¥ | |||||||||
Differences between management reporting and Japanese GAAP: |
||||||||||||
Total credit costs |
( |
) | ( |
) | ( |
) | ||||||
Gains on equity instruments |
||||||||||||
Extraordinary gains or losses and others |
( |
) | ( |
) | ( |
) | ||||||
Profit before tax under Japanese GAAP |
||||||||||||
Differences between Japanese GAAP and IFRS: |
||||||||||||
Scope of consolidation |
||||||||||||
Derivative financial instruments |
( |
) | ( |
) | ||||||||
Investment securities |
( |
) | ( |
) | ( |
) | ||||||
Loans and advances |
( |
) | ||||||||||
Investments in associates and joint ventures |
( |
) | ( |
) | ||||||||
Property, plant and equipment |
( |
) | ||||||||||
Lease accounting |
( |
) | ( |
) | ( |
) | ||||||
Defined benefit plans |
( |
) | ( |
) | ( |
) | ||||||
Foreign currency translation |
( |
) | ||||||||||
Classification of equity and liability |
||||||||||||
Others |
( |
) | ||||||||||
Profit before tax under IFRS |
¥ | ¥ | ¥ | |||||||||
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
Domestic (1) : |
||||||||||||
Japan |
¥ | ¥ | ¥ | |||||||||
Total domestic |
||||||||||||
Foreign (1)(2) : |
||||||||||||
Americas |
||||||||||||
Europe and Middle East |
||||||||||||
Asia and Oceania |
||||||||||||
Total foreign |
||||||||||||
Total operating income (3) |
¥ | ¥ | |
¥ | |
|||||||
| (1) | The geographical segmentation is determined based on the degrees of the following factors: geographic proximity, similarity of economic activities and relationship of business activities among regions. |
| (2) | Americas mostly consists of the United States; Europe and Middle East include the United Kingdom, Germany and others; Asia and Oceania include China, Singapore, Indonesia and others except Japan. |
| (3) | Total operating income comprises net interest income, net fee and commission income, net trading income (loss), net income from financial assets and liabilities at fair value through profit or loss, net investment income, net gains (losses) arising from derecognition of financial assets at amortized cost and other income. |
5 |
CASH AND DEPOSITS WITH BANKS |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
Cash |
¥ | ¥ | ||||||
Deposits with banks |
||||||||
Total cash and deposits with banks |
¥ | ¥ | ||||||
At March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
Cash and deposits with banks |
¥ | ¥ | ¥ | |||||||||
Less: term deposits with original maturities over three months |
( |
) | ( |
) | ( |
) | ||||||
Less: cash segregated as deposits and others |
( |
) | ( |
) | ( |
) | ||||||
Cash and cash equivalents |
¥ | ¥ | ¥ | |||||||||
6 |
TRADING ASSETS |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
Debt instruments |
¥ | ¥ | ||||||
Equity instruments |
||||||||
Total trading assets |
¥ | ¥ | ||||||
7 |
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING |
At March 31, 2025 |
||||||||||||||||||||||||
Trading |
Risk Management (1) |
|||||||||||||||||||||||
Notional amounts |
Assets |
Liabilities |
Notional amounts |
Assets |
Liabilities |
|||||||||||||||||||
(In millions) |
||||||||||||||||||||||||
Interest rate derivatives |
¥ |
¥ |
¥ |
¥ |
¥ |
¥ |
||||||||||||||||||
Futures |
||||||||||||||||||||||||
Listed Options |
||||||||||||||||||||||||
Forwards |
||||||||||||||||||||||||
Swaps |
||||||||||||||||||||||||
OTC Options |
||||||||||||||||||||||||
Currency derivatives |
||||||||||||||||||||||||
Futures |
||||||||||||||||||||||||
Listed Options |
||||||||||||||||||||||||
Forwards |
||||||||||||||||||||||||
Swaps |
||||||||||||||||||||||||
OTC Options |
||||||||||||||||||||||||
Equity derivatives |
||||||||||||||||||||||||
Futures |
||||||||||||||||||||||||
Listed Options |
||||||||||||||||||||||||
Forwards |
||||||||||||||||||||||||
Swaps |
||||||||||||||||||||||||
OTC Options |
||||||||||||||||||||||||
Commodity derivatives |
||||||||||||||||||||||||
Futures |
||||||||||||||||||||||||
Listed Options |
||||||||||||||||||||||||
Forwards |
||||||||||||||||||||||||
Swaps |
||||||||||||||||||||||||
OTC Options |
||||||||||||||||||||||||
Credit derivatives |
||||||||||||||||||||||||
Total derivative financial instruments |
¥ |
¥ |
¥ |
¥ |
¥ |
¥ |
||||||||||||||||||
At March 31, 2024 |
||||||||||||||||||||||||
Trading |
Risk Management (1) |
|||||||||||||||||||||||
Notional amounts |
Assets |
Liabilities |
Notional amounts |
Assets |
Liabilities |
|||||||||||||||||||
(In millions) |
||||||||||||||||||||||||
Interest rate derivatives |
¥ |
¥ |
¥ |
¥ |
¥ |
¥ |
||||||||||||||||||
Futures |
||||||||||||||||||||||||
Listed Options |
— |
— |
— |
|||||||||||||||||||||
Forwards |
— |
— |
— |
|||||||||||||||||||||
Swaps |
||||||||||||||||||||||||
OTC Options |
— |
|||||||||||||||||||||||
Currency derivatives |
||||||||||||||||||||||||
Futures |
— |
— |
— |
|||||||||||||||||||||
Listed Options |
— |
— |
— |
— |
— |
— |
||||||||||||||||||
Forwards |
||||||||||||||||||||||||
Swaps |
||||||||||||||||||||||||
OTC Options |
— |
— |
— |
|||||||||||||||||||||
Equity derivatives |
— |
— |
— |
|||||||||||||||||||||
Futures |
— |
— |
— |
|||||||||||||||||||||
Listed Options |
— |
— |
— |
|||||||||||||||||||||
Forwards |
— |
— |
— |
|||||||||||||||||||||
Swaps |
— |
— |
— |
|||||||||||||||||||||
OTC Options |
— |
— |
— |
|||||||||||||||||||||
Commodity derivatives |
— |
— |
— |
|||||||||||||||||||||
Futures |
— |
— |
— |
|||||||||||||||||||||
Listed Options |
— |
— |
— |
— |
— |
— |
||||||||||||||||||
Forwards |
— |
— |
— |
— |
— |
— |
||||||||||||||||||
Swaps |
— |
— |
— |
|||||||||||||||||||||
OTC Options |
— |
— |
— |
|||||||||||||||||||||
Credit derivatives |
— |
— |
— |
|||||||||||||||||||||
Total derivative financial instruments |
¥ |
¥ |
¥ |
¥ |
¥ |
¥ |
||||||||||||||||||
| (1) | Derivative financial instruments categorized as “Risk Management” are used for economic hedging, such as managing the exposure to changes in fair value of the loan portfolio, and are identified as hedging instruments under Japanese GAAP. Under IFRS, the Group applies hedge accounting for certain fixed rate debt securities in issue, borrowings, and debt instruments at fair value through other comprehensive income (“FVOCI”) and net investments in foreign operations. Derivative financial instruments designated as hedging instruments are also categorized as “Risk Management.” |
Line item in the consolidated statements of financial position where the hedging instrument is included |
At March 31, 2025 |
For the fiscal year ended March 31, 2025 |
||||||||||||||||||
Notional amounts (1) |
Carrying amounts |
Change in value used for calculating hedge ineffectiveness |
||||||||||||||||||
Assets |
Liabilities |
|||||||||||||||||||
(In millions) |
||||||||||||||||||||
Interest rate risk |
||||||||||||||||||||
Interest rate swaps |
Derivative financial instruments |
|
¥ | ¥ | ¥ | ¥ | ( |
) | ||||||||||||
Interest rate options |
Derivative financial instruments |
|
— | ( |
) | |||||||||||||||
| (1) | At March 31, 2025, the notional amount of interest rate swaps with remaining maturities of |
Line item in the consolidated statements of financial position where the hedging instrument is included |
At March 31, 2024 |
For the fiscal year ended March 31, 2024 |
||||||||||||||||||
Notional amounts (1) |
Carrying amounts |
Change in value used for calculating hedge ineffectiveness |
||||||||||||||||||
Assets |
Liabilities |
|||||||||||||||||||
(In millions) |
||||||||||||||||||||
Interest rate risk |
||||||||||||||||||||
Interest rate swaps |
Derivative financial instruments |
|
¥ | ¥ | ¥ | ¥ | ( |
) | ||||||||||||
Interest rate options |
Derivative financial instruments |
|
— | ( |
) | |||||||||||||||
| (1) | At March 31, 2024, the notional amount of interest rate swaps with remaining maturities of |
Line item in the consolidated statements of financial position where the hedged item is included |
At March 31, 2025 |
For the fiscal year ended March 31, 2025 |
||||||||||
Carrying amounts |
Change in value used for calculating hedge ineffectiveness |
|||||||||||
(In millions) |
||||||||||||
Interest rate risk |
||||||||||||
Debt instruments at FVOCI |
Investment securities | ¥ | ¥ | |||||||||
Debt securities in issue |
Debt securities in issue | ( |
) | |||||||||
Borrowings |
Borrowings | |||||||||||
Line item in the consolidated statements of financial position where the hedged item is included |
At March 31, 2024 |
For the fiscal year ended March 31, 2024 |
||||||||||
Carrying amounts |
Change in value used for calculating hedge ineffectiveness |
|||||||||||
(In millions) |
||||||||||||
Interest rate risk |
||||||||||||
Debt instruments at FVOCI |
Investment securities | ¥ | ¥ | ( |
) | |||||||
Debt securities in issue |
Debt securities in issue | |||||||||||
Borrowings |
Borrowings | |||||||||||
Line item in the consolidated statements of financial position where the hedging instrument is included |
At March 31, 2025 |
For the fiscal year ended March 31, 2025 |
||||||||||||||||
Nominal amounts |
Carrying amounts |
Change in value used for calculating hedge ineffectiveness |
||||||||||||||||
Assets |
Liabilities |
|||||||||||||||||
(In millions) |
||||||||||||||||||
Foreign exchange forward contracts |
Derivative financial instruments | ¥ | ¥ | ¥ | ¥ | ( |
) | |||||||||||
Foreign currency denominated financial liabilities |
Debt securities in issue, Borrowings, Deposits | |||||||||||||||||
Line item in the consolidated statements of financial position where the hedging instrument is included |
At March 31, 2024 |
For the fiscal year ended March 31, 2024 |
||||||||||||||||
Nominal amounts |
Carrying amounts |
Change in value used for calculating hedge ineffectiveness |
||||||||||||||||
Assets |
Liabilities |
|||||||||||||||||
(In millions) |
||||||||||||||||||
Foreign exchange forward contracts |
Derivative financial instruments | ¥ | ¥ | ¥ | ¥ | ( |
) | |||||||||||
Foreign currency denominated financial liabilities |
Debt securities in issue, Borrowings, Deposits | — | ( |
) | ||||||||||||||
For the fiscal year ended March 31, 2025 |
At March 31, 2025 |
|||||||
Change in value used for calculating hedge ineffectiveness |
Translating foreign operations reserve |
|||||||
(In millions) |
||||||||
USD foreign operations |
¥ | ( |
) | ¥ | ||||
EUR foreign operations |
( |
) | ||||||
THB foreign operations |
||||||||
Other foreign operations |
||||||||
Total |
¥ | ¥ | ||||||
For the fiscal year ended March 31, 2024 |
At March 31, 2024 |
|||||||
Change in value used for calculating hedge ineffectiveness |
Translating foreign operations reserve |
|||||||
(In millions) |
||||||||
USD foreign operations |
¥ | |
¥ | |
||||
EUR foreign operations |
||||||||
THB foreign operations |
||||||||
Other foreign operations |
||||||||
Total |
¥ | ¥ | ||||||
At March 31, 2025 |
||||||||||||||||||||||||
Protection purchased |
Protection sold |
|||||||||||||||||||||||
Notional amounts |
Assets |
Liabilities |
Notional amounts |
Assets |
Liabilities |
|||||||||||||||||||
(In millions) |
||||||||||||||||||||||||
Managing the Group’s credit risk portfolio |
¥ |
¥ |
¥ |
¥ |
¥ |
¥ |
||||||||||||||||||
Trading purposes |
||||||||||||||||||||||||
Facilitating client transactions |
||||||||||||||||||||||||
Total |
¥ |
¥ |
¥ |
¥ |
¥ |
¥ |
||||||||||||||||||
At March 31, 2024 |
||||||||||||||||||||||||
Protection purchased |
Protection sold |
|||||||||||||||||||||||
Notional amounts |
Assets |
Liabilities |
Notional amounts |
Assets |
Liabilities |
|||||||||||||||||||
(In millions) |
||||||||||||||||||||||||
Managing the Group’s credit risk portfolio |
¥ |
¥ |
¥ |
¥ |
¥ |
¥ |
||||||||||||||||||
Trading purposes |
— |
— |
— |
— |
||||||||||||||||||||
Facilitating client transactions |
— |
|||||||||||||||||||||||
Total |
¥ |
¥ |
¥ |
¥ |
¥ |
¥ |
||||||||||||||||||
At March 31, 2025 |
At March 31, 2024 |
|||||||||||||||
Protection purchased |
Protection sold |
Protection purchased |
Protection sold |
|||||||||||||
(In millions) |
||||||||||||||||
Banks and broker-dealers |
¥ | ¥ | ¥ | ¥ | ||||||||||||
Insurance and other financial guaranty firms |
— | — | ||||||||||||||
Total |
¥ | ¥ | ¥ | ¥ | ||||||||||||
8 |
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
Debt instruments |
¥ | ¥ | ||||||
Equity instruments |
||||||||
Total financial assets at fair value through profit or loss |
¥ | ¥ | ||||||
9 |
INVESTMENT SECURITIES |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
Debt instruments at amortized cost: |
||||||||
Domestic: |
||||||||
Japanese government bonds |
¥ | ¥ | ||||||
Japanese municipal bonds |
||||||||
Japanese corporate bonds |
||||||||
Total domestic |
||||||||
Foreign: |
||||||||
Bonds issued by governments and official institutions excluding U.S. Treasury and other U.S. government agency bonds |
||||||||
Mortgage-backed securities |
||||||||
Other debt instruments |
||||||||
Total foreign |
||||||||
Total debt instruments at amortized cost |
¥ | ¥ | |
|||||
Debt instruments at fair value through other comprehensive income: |
||||||||
Domestic: |
||||||||
Japanese government bonds |
¥ | ¥ | ||||||
Japanese municipal bonds |
||||||||
Japanese corporate bonds |
||||||||
Other debt instruments |
||||||||
Total domestic |
||||||||
Foreign: |
||||||||
U.S. Treasury and other U.S. government agency bonds |
||||||||
Bonds issued by governments and official institutions excluding U.S. Treasury and other U.S. government agency bonds |
||||||||
Mortgage-backed securities |
||||||||
Other debt instruments |
||||||||
Total foreign |
||||||||
Total debt instruments at fair value through other comprehensive income |
¥ | ¥ | ||||||
Equity instruments at fair value through other comprehensive income: |
||||||||
Domestic equity instruments |
¥ | ¥ | ||||||
Foreign equity instruments |
||||||||
Total equity instruments at fair value through other comprehensive income |
¥ | ¥ | ||||||
Total investment securities |
¥ | ¥ | ||||||
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
Listed |
¥ | ¥ | ||||||
Unlisted |
||||||||
Total equity instruments at fair value through other comprehensive income |
¥ | ¥ | ||||||
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
TOYOTA MOTOR CORPORATION |
¥ | ¥ | ||||||
Ares Management Corporation |
||||||||
Jefferies Financial Group Inc. |
||||||||
Kotak Mahindra Bank Limited |
||||||||
DAIKIN INDUSTRIES, LTD. |
||||||||
SBI Holdings, Inc. |
||||||||
ITOCHU Corporation |
||||||||
Sumitomo Realty & Development Co., Ltd. |
||||||||
Seven & i Holdings Co., Ltd. |
||||||||
DAIWA HOUSE INDUSTRY CO., LTD. |
||||||||
MITSUI & CO., LTD. |
||||||||
KUBOTA CORPORATION |
||||||||
Sanwa Holdings Corporation |
||||||||
East Japan Railway Company |
||||||||
ESR Group Limited |
||||||||
NIPPON STEEL CORPORATION |
||||||||
Fujikura Ltd. |
||||||||
Japan Exchange Group, Inc. |
||||||||
Mitsui O.S.K. Lines, Ltd. |
||||||||
Mitsui Fudosan Co., Ltd. |
||||||||
TOYOTA TSUSHO CORPORATION |
||||||||
SG HOLDINGS CO., LTD. |
||||||||
NIDEC CORPORATION |
||||||||
Central Japan Railway Company |
||||||||
Makita Corporation |
||||||||
West Japan Railway Company |
||||||||
TORAY INDUSTRIES, INC. |
||||||||
DAIFUKU CO., LTD. |
||||||||
MINEBEA MITSUMI Inc. |
||||||||
Shionogi & Co., Ltd. |
||||||||
Stanley Electric Co., Ltd. |
||||||||
KAJIMA CORPORATION |
||||||||
GMO Payment Gateway, Inc. |
||||||||
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| CME Group Inc. |
||||||||
| Murata Manufacturing Co., Ltd. |
||||||||
| ASAHI KASEI CORPORATION |
||||||||
| BANDAI NAMCO Holdings Inc. |
||||||||
| DAIICHI SANKYO COMPANY, LIMITED |
||||||||
| TOYO SUISAN KAISHA, LTD. |
||||||||
| Sekisui House, Ltd. |
||||||||
| TBS HOLDINGS, INC. |
||||||||
| BROTHER INDUSTRIES, LTD. |
||||||||
| The Kansai Electric Power Company, Incorporated |
||||||||
| TOHO GAS CO., LTD. |
||||||||
| Maruichi Steel Tube Ltd. |
||||||||
| Marubeni Corporation |
||||||||
| FUJIFILM Holdings Corporation |
||||||||
| Kawasaki Heavy Industries, Ltd. |
||||||||
| YAOKO CO., LTD. |
||||||||
| KANEKA CORPORATION |
||||||||
| Tokyo Electric Power Company Holdings, Incorporated |
||||||||
| Chubu Electric Power Company, Incorporated |
||||||||
| Idemitsu Kosan Co., Ltd. |
||||||||
| SHIMANO INC. |
||||||||
| KOITO MANUFACTURING CO., LTD. |
||||||||
| Mazda Motor Corporation |
||||||||
| Sanrio Company, Ltd. |
||||||||
| ASICS Corporation |
||||||||
| BRIDGESTONE CORPORATION |
||||||||
| Others |
||||||||
| |
|
|
|
|||||
| Total listed equity instruments at fair value through other comprehensive income |
¥ | ¥ | ||||||
| |
|
|
|
|||||
For the fiscal year ended March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Fair value of the equity instruments at fair value through other comprehensive income at the date of derecognition |
¥ | ¥ | |
|||||
| Cumulative gain on disposal |
||||||||
10 |
LOANS AND ADVANCES |
At March 31, 2025 |
||||||||||||||||
12-month ECL |
Lifetime ECL not credit- impaired |
Lifetime ECL credit-impaired |
Total |
|||||||||||||
(In millions) |
||||||||||||||||
| Loans and advances at amortized cost: |
||||||||||||||||
| Gross loans and advances |
¥ | ¥ | ¥ | ¥ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Adjust: Unearned income, unamortized premiums—net and deferred loan fees—net |
( |
) | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Less: Allowance for loan losses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Carrying amount |
¥ | |||||||||||||||
| |
|
|||||||||||||||
At March 31, 2024 |
||||||||||||||||
12-month ECL |
Lifetime ECL not credit- impaired |
Lifetime ECL credit-impaired |
Total |
|||||||||||||
(In millions) |
||||||||||||||||
| Loans and advances at amortized cost: |
||||||||||||||||
| Gross loans and advances |
¥ | ¥ | ¥ | ¥ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Adjust: Unearned income, unamortized premiums—net and deferred loan fees—net |
( |
) | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Less: Allowance for loan losses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Carrying amount |
¥ | |||||||||||||||
| |
|
|||||||||||||||
11 |
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES |
Company Name |
Country of Incorporation |
Proportion of Ownership Interest (1) |
Proportion of Voting Rights (1) |
Main Business |
||||||||||||
(%) |
(%) |
|||||||||||||||
Principal Associates |
||||||||||||||||
PayPay Bank Corporation |
||||||||||||||||
The Bank of East Asia, Limited |
||||||||||||||||
ACLEDA Bank Plc. |
||||||||||||||||
Vietnam Prosperity Joint-Stock Commercial Bank |
||||||||||||||||
Rizal Commercial Banking Corporation |
||||||||||||||||
Sumitomo Mitsui Auto Service Company, Limited |
||||||||||||||||
SMBC Aviation Capital Limited |
||||||||||||||||
POCKET CARD CO., LTD. |
||||||||||||||||
VPBank SMBC Finance Company Limited |
||||||||||||||||
SAKURA KCS Corporation |
and data processing |
| ||||||||||||||
JSOL Corporation |
and data processing |
| ||||||||||||||
Sakura Information Systems Co., Ltd. |
and data processing |
| ||||||||||||||
China Post & Capital Fund Management Co., Ltd. |
Investment management, and investment advisory and agency |
|||||||||||||||
Principal Joint Venture |
||||||||||||||||
Sumitomo Mitsui Finance and Leasing Company, Limited |
||||||||||||||||
| (1) | Percentages of proportion of ownership interest and proportion of voting rights have been truncated. |
At and for the fiscal year ended March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
Carrying amount of investments in associates and joint ventures |
¥ | ¥ | ||||||
Share of: |
||||||||
Profit from continuing operations |
||||||||
Other comprehensive income |
||||||||
Total comprehensive income |
||||||||
12 |
PROPERTY, PLANT AND EQUIPMENT |
Assets for rent |
Land |
Buildings |
Right of use assets |
Others |
Total |
|||||||||||||||||||
(In millions) |
||||||||||||||||||||||||
Cost |
¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ||||||||||||||||||
Accumulated depreciation and impairment losses |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Net carrying amount at April 1, 2023 |
||||||||||||||||||||||||
Additions |
||||||||||||||||||||||||
Acquisition of subsidiaries and businesses |
— | |||||||||||||||||||||||
Disposals (1) |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Depreciation |
( |
) | — | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||
Impairment losses |
— | ( |
) | ( |
) | — | ( |
) | ( |
) | ||||||||||||||
Exchange differences |
||||||||||||||||||||||||
Others |
— | ( |
) | ( |
) | |||||||||||||||||||
Net carrying amount |
— | |||||||||||||||||||||||
Cost |
— | |||||||||||||||||||||||
Accumulated depreciation and impairment losses |
— | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||
Net carrying amount at March 31, 2024 |
— | |||||||||||||||||||||||
Additions |
||||||||||||||||||||||||
Acquisition of subsidiaries and businesses |
||||||||||||||||||||||||
Disposals |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
Depreciation |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Impairment losses |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
Exchange differences |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Others |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
Net carrying amount |
||||||||||||||||||||||||
Assets for rent |
Land |
Buildings |
Right of use assets |
Others |
Total |
|||||||||||||||||||
(In millions) |
||||||||||||||||||||||||
Cost |
||||||||||||||||||||||||
Accumulated depreciation and impairment losses |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
Net carrying amount at March 31, 2025 |
¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ||||||||||||||||||
| (1) | Disposals include assets for rent owned by SMBC Rail Services LLC, which has no longer been the Company’s subsidiary from December 2023. |
13 |
LEASES |
Net carrying amount |
Depreciation |
|||||||||||||||
At March 31, |
For the fiscal year ended March 31, |
|||||||||||||||
2025 |
2024 |
2025 |
2024 |
|||||||||||||
(In millions) |
||||||||||||||||
Land and buildings |
¥ | |
¥ | |
¥ | |
¥ | |
||||||||
Other tangible assets (1) |
||||||||||||||||
Intangible assets (2) |
||||||||||||||||
Total |
¥ | ¥ | ¥ | ¥ | ||||||||||||
| (1) | Other tangible assets include mainly office equipment, machinery and vehicles. |
| (2) | Intangible assets include mainly software. |
At March 31, 2025 |
At March 31, 2024 |
|||||||
(In millions) |
||||||||
Not later than one year |
¥ | ¥ | ||||||
Later than one year and not later than five years |
||||||||
Later than five years |
||||||||
Total |
||||||||
Less: Future interest charges |
( |
) | ( |
) | ||||
Lease liabilities (1) |
¥ | ¥ | ||||||
| (1) | Lease liabilities is included in “Borrowings” in the consolidated statements of financial position. Refer to Note 19 “Borrowings.” |
At March 31, 2025 |
||||||||||||||||
Undiscounted lease payments |
Unearned finance income |
Discounted lease payments (1) |
Unguaranteed residual values (1) |
|||||||||||||
(In millions) |
||||||||||||||||
Not later than one year |
¥ |
¥ |
¥ |
¥ |
||||||||||||
Later than one year and not later than two years |
||||||||||||||||
Later than two years and not later than three years |
||||||||||||||||
Later than three years and not later than four years |
||||||||||||||||
Later than four years and not later than five years |
||||||||||||||||
Later than five years |
||||||||||||||||
Total |
¥ |
¥ |
¥ |
¥ |
||||||||||||
At March 31, 2024 |
||||||||||||||||
Undiscounted lease payments |
Unearned finance income |
Discounted lease payments (1) |
Unguaranteed residual values (1) |
|||||||||||||
(In millions) |
||||||||||||||||
Not later than one year |
¥ |
¥ |
¥ |
¥ |
||||||||||||
Later than one year and not later than two years |
||||||||||||||||
Later than two years and not later than three years |
||||||||||||||||
Later than three years and not later than four years |
||||||||||||||||
Later than four years and not later than five years |
||||||||||||||||
Later than five years |
||||||||||||||||
Total |
¥ |
¥ |
¥ |
¥ |
||||||||||||
| (1) | Discounted lease payments and unguaranteed residual values are included in “Loans and advances” in the consolidated statements of financial position. |
At March 31, 2025 |
At March 31, 2024 |
|||||||
(In millions) |
||||||||
Not later than one year |
¥ | ¥ | ||||||
Later than one year and not later than two years |
||||||||
Later than two years and not later than three years |
||||||||
Later than three years and not later than four years |
||||||||
Later than four years and not later than five years |
||||||||
Later than five years |
||||||||
Total |
¥ | ¥ | ||||||
14 |
INTANGIBLE ASSETS |
Retail Business Unit |
Global Business Unit |
Head office account and others |
Total |
|||||||||||||
(In millions) |
||||||||||||||||
Gross amount of goodwill (1) |
¥ | ¥ | ¥ | ¥ | ||||||||||||
Accumulated impairment losses (1) |
— | — | ( |
) | ( |
) | ||||||||||
Net carrying amount at April 1, 2023 |
||||||||||||||||
Acquisitions |
— | — | ||||||||||||||
Exchange differences |
— | — | ||||||||||||||
Net carrying amount |
||||||||||||||||
Gross amount of goodwill (1) |
||||||||||||||||
Accumulated impairment losses (1) |
— | — | ( |
) | ( |
) | ||||||||||
Net carrying amount at March 31, 2024 |
||||||||||||||||
Impairment losses |
( |
) | ( |
) | ( |
) | ||||||||||
Exchange differences |
( |
) | ( |
) | ||||||||||||
Other |
( |
) | ( |
) | ||||||||||||
Net carrying amount |
||||||||||||||||
Gross amount of goodwill (1) |
||||||||||||||||
Accumulated impairment losses (1) |
( |
) | ( |
) | ( |
) | ||||||||||
Net carrying amount at March 31, 2025 |
¥ | ¥ | ¥ | ¥ | ||||||||||||
| (1) | The goodwill where all amounts have been impaired is excluded from the gross amount of goodwill and accumulated impairment losses. |
SMBC Consumer Finance |
SMDAM |
SMFG India Credit Company Limited |
||||||||||
For the fiscal year ended March 31, 2025: |
||||||||||||
Pre-tax discount rate |
% | % | % | |||||||||
Growth rate |
% | % | % | |||||||||
For the fiscal year ended March 31, 2024: |
||||||||||||
Pre-tax discount rate |
% | % | % | |||||||||
Growth rate |
% | % | % | |||||||||
Internally generated software |
Purchased software |
Contractual customer relationships |
Trademarks |
Other intangibles |
Total |
|||||||||||||||||||
(In millions) |
||||||||||||||||||||||||
Cost |
¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ||||||||||||||||||
Accumulated amortization and impairment losses |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Net carrying amount at April 1, 2023 |
||||||||||||||||||||||||
Additions |
— | — | ||||||||||||||||||||||
Acquisition of subsidiaries and businesses |
— | — | — | |||||||||||||||||||||
Disposals |
( |
) | ( |
) | — | — | ( |
) | ( |
) | ||||||||||||||
Amortization |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Impairment losses |
( |
) | ( |
) | — | ( |
) | — | ( |
) | ||||||||||||||
Exchange differences |
||||||||||||||||||||||||
Others |
( |
) | — | — | ( |
) | ||||||||||||||||||
Net carrying amount |
— | |||||||||||||||||||||||
Cost |
||||||||||||||||||||||||
Accumulated amortization and impairment losses |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Net carrying amount at March 31, 2024 |
— | |||||||||||||||||||||||
Additions |
||||||||||||||||||||||||
Acquisition of subsidiaries and businesses |
||||||||||||||||||||||||
Disposals |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Amortization |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Impairment losses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Exchange differences |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Others |
( |
) | ||||||||||||||||||||||
Net carrying amount |
||||||||||||||||||||||||
Internally generated software |
Purchased software |
Contractual customer relationships |
Trademarks |
Other intangibles |
Total |
|||||||||||||||||||
(In millions) |
||||||||||||||||||||||||
Cost |
||||||||||||||||||||||||
Accumulated amortization and impairment losses |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Net carrying amount at March 31, 2025 |
¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ||||||||||||||||||
15 |
OTHER ASSETS |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Prepaid expenses |
¥ | ¥ | ||||||
| Accrued income |
||||||||
| Receivables from brokers, dealers and customers for securities transactions |
||||||||
| Cash collateral provided for derivative and other financial transactions |
||||||||
| Retirement benefit assets |
||||||||
| Security deposits |
||||||||
| Others |
||||||||
| |
|
|
|
|||||
| Total other assets |
¥ | ¥ | |
|||||
| |
|
|
|
|||||
16 |
DEPOSITS |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Non-interest-bearing demand deposits |
¥ | ¥ | ||||||
| Interest-bearing demand deposits |
||||||||
| Deposits at notice |
||||||||
| Time deposits |
||||||||
| Negotiable certificates of deposit |
||||||||
| Others (1) |
||||||||
| |
|
|
|
|||||
| Total deposits |
¥ | ¥ | |
|||||
| |
|
|
|
|||||
| (1) | Others include, among other items, foreign currency deposits in domestic offices and Japanese yen accounts held by foreign depositors in domestic offices. |
17 |
TRADING LIABILITIES |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Debt instruments “short position” |
¥ | ¥ | ||||||
| Equity instruments “short position” |
||||||||
| |
|
|
|
|||||
| Total trading liabilities |
¥ | ¥ | |
|||||
| |
|
|
|
|||||
18 |
FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Borrowings |
¥ | ¥ | ||||||
| Debt securities in issue |
||||||||
| |
|
|
|
|||||
| Total financial liabilities designated at fair value through profit or loss |
¥ | ¥ | |
|||||
| |
|
|
|
|||||
19 |
BORROWINGS |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Unsubordinated borrowings |
¥ | ¥ | ||||||
| Subordinated borrowings |
||||||||
| Liabilities associated with securitization transactions |
||||||||
| Lease liabilities |
||||||||
| |
|
|
|
|||||
| Total borrowings |
¥ | ¥ | |
|||||
| |
|
|
|
|||||
20 |
DEBT SECURITIES IN ISSUE |
At March 31, |
||||||||||||
Interest rate |
2025 |
2024 |
||||||||||
(In millions) |
||||||||||||
| SMFG: |
||||||||||||
| Unsubordinated bonds: |
||||||||||||
| Unsubordinated bonds, payable in due |
¥ | |
¥ | |
||||||||
| Unsubordinated bonds, payable in due |
||||||||||||
| Unsubordinated bonds, payable in due |
||||||||||||
| Unsubordinated bonds, payable in due |
||||||||||||
| Unsubordinated bonds, payable in due |
||||||||||||
| Subordinated bonds: |
||||||||||||
| Subordinated bonds, payable in due |
||||||||||||
| Subordinated bonds, payable in due |
||||||||||||
| |
|
|
|
|||||||||
| Total SMFG |
||||||||||||
| |
|
|
|
|||||||||
| SMBC: |
||||||||||||
| Commercial paper |
||||||||||||
| Unsubordinated bonds: |
||||||||||||
| Unsubordinated bonds, payable in due |
||||||||||||
| Unsubordinated bonds, payable in due |
||||||||||||
| Unsubordinated bonds, payable in due |
||||||||||||
| Subordinated bonds: |
||||||||||||
| Subordinated bonds, payable in due |
||||||||||||
| |
|
|
|
|||||||||
| Total SMBC |
||||||||||||
| |
|
|
|
|||||||||
| Other subsidiaries: |
||||||||||||
| Commercial paper |
||||||||||||
| Unsubordinated bonds: |
||||||||||||
| Unsubordinated bonds, payable in due |
||||||||||||
| Unsubordinated bonds, payable in due |
||||||||||||
| Unsubordinated bonds, payable in due |
||||||||||||
| Unsubordinated bonds, payable in due |
||||||||||||
| Unsubordinated bonds, payable in due |
||||||||||||
| Unsubordinated bonds, payable in due |
||||||||||||
| Subordinated bonds: |
||||||||||||
| Subordinated bonds, payable in due |
||||||||||||
| |
|
|
|
|||||||||
| Total other subsidiaries |
||||||||||||
| |
|
|
|
|||||||||
| Total debt securities in issue |
¥ | ¥ | ||||||||||
| |
|
|
|
|||||||||
For the fiscal year ended March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Subordinated bonds at beginning of period (1) |
¥ | ¥ | ||||||
| Cash flows: |
||||||||
| Proceeds from issuance of subordinated bonds |
||||||||
| Redemption of subordinated bonds |
( |
) | ||||||
| Non-cash changes: |
||||||||
| Foreign exchange translations |
( |
) | ||||||
| Others |
( |
) | ||||||
| |
|
|
|
|||||
| Subordinated bonds at end of period (1) |
¥ | ¥ | ||||||
| |
|
|
|
|||||
| (1) | The balances are comprised of subordinated bonds issued by SMFG, SMBC and other subsidiaries. |
21 |
PROVISIONS |
Provision for interest repayment |
Other provisions |
Total |
||||||||||
(In millions) |
||||||||||||
| Balance at April 1, 2023 |
¥ | ¥ | ¥ | |||||||||
| Additional provisions |
||||||||||||
| Amounts used |
( |
) | ( |
) | ( |
) | ||||||
| Unused amounts reversed |
— | ( |
) | ( |
) | |||||||
| Amortization of discount and effect of change in discount rate |
( |
) | ( |
) | ||||||||
| Others |
— | |||||||||||
| |
|
|
|
|
|
|||||||
| Balance at March 31, 2024 |
||||||||||||
| |
|
|
|
|
|
|||||||
| Additional provisions |
||||||||||||
| Amounts used |
( |
) | ( |
) | ( |
) | ||||||
| Unused amounts reversed |
( |
) | ( |
) | ||||||||
| Amortization of discount and effect of change in discount rate |
( |
) | ( |
) | ||||||||
| Others |
( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|||||||
| Balance at March 31, 2025 |
¥ | ¥ | ¥ | |||||||||
| |
|
|
|
|
|
|||||||
22 |
OTHER LIABILITIES |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
Accrued expenses |
¥ | ¥ | ||||||
Unearned income |
||||||||
Financial guarantees and other credit-related contingent liabilities |
||||||||
Due to trust account |
||||||||
Payables to brokers, dealers and customers for securities transactions |
||||||||
Payables related to credit card services |
||||||||
Obligations from factoring transactions |
||||||||
Retirement benefit liabilities |
||||||||
Guarantee deposits and derivative cash collateral received |
||||||||
Others |
||||||||
Total other liabilities |
¥ | ¥ | ||||||
23 |
DEFERRED INCOME TAX |
For the fiscal year ended March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
At beginning of period |
¥ | ( |
) | ¥ | ( |
) | ||
Deferred tax benefit |
||||||||
Deferred tax relating to other comprehensive income: |
||||||||
Remeasurements of defined benefit plans reserve |
( |
) | ||||||
Financial instruments at fair value through other comprehensive income reserve |
( |
) | ||||||
Own credit on financial liabilities designated at fair value through profit or loss reserve |
( |
) | ||||||
Exchange differences on translating foreign operations reserve |
( |
) | — | |||||
Acquisition and disposal of subsidiaries and businesses |
( |
) | ( |
) | ||||
Exchange differences and others |
||||||||
At end of period |
¥ | ( |
) | ¥ | ( |
) | ||
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
Deferred tax assets: |
||||||||
Loans and advances |
¥ | ¥ | ||||||
Lease liabilities |
||||||||
Provision for interest repayment |
||||||||
Derivative financial instruments |
||||||||
Retirement benefits |
||||||||
Tax losses carried forward |
||||||||
Investment securities |
||||||||
Other deductible temporary differences |
||||||||
Total deferred tax assets |
||||||||
Deferred tax liabilities: |
||||||||
Investment securities |
||||||||
Right of use assets |
||||||||
Retirement benefits |
||||||||
Goodwill and intangible assets |
||||||||
Lease transactions |
||||||||
Property, plant and equipment |
||||||||
Derivative financial instruments |
||||||||
Other taxable temporary differences |
||||||||
Total deferred tax liabilities |
||||||||
Net deferred tax liabilities (1) |
¥ | ( |
) |
¥ | ( |
) | ||
| (1) | Deferred tax assets and deferred tax liabilities are offset in the consolidated statements of financial position if the entity has a legally enforceable right to set off current tax assets against current tax liabilities, and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity. |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Deductible temporary differences |
¥ | ¥ | |
|||||
| Tax losses carried forward which will expire in 1 year |
||||||||
| 2 years |
||||||||
| 3 years |
||||||||
| 4 years |
||||||||
| 5 years |
||||||||
| 6 years |
||||||||
| 7 years |
||||||||
| 8 years |
||||||||
| 9 years |
||||||||
| 10 years and thereafter |
||||||||
| |
|
|
|
|||||
| Total deductible temporary differences and tax losses carried forward (1) |
¥ | ¥ | ||||||
| |
|
|
|
|||||
| (1) | Under the group aggregation system, the Company and its wholly-owned domestic subsidiaries recognized deferred tax assets relating to deductible temporary differences and tax losses carried forward on a consolidated basis for Japanese national corporation tax purposes and on a stand-alone basis for Japanese local corporation tax purposes. There are deductible temporary differences and tax losses carried forward on which deferred tax assets are recognized for Japanese national corporation tax purposes, but on which no deferred tax assets are recognized for Japanese local corporation tax purposes. These deductible temporary differences and tax losses carried forward amounted to ¥ |
For the fiscal year ended March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Derivative financial instruments |
¥ | ¥ | ||||||
| Loans and advances |
||||||||
| Investment securities |
( |
) | ||||||
| Provision for interest repayment |
( |
) | ||||||
| Tax losses carried forward |
( |
) |
( |
) | ||||
| Goodwill and intangible assets |
||||||||
| Retirement benefits |
||||||||
| Right of use assets |
||||||||
| Lease liabilities |
( |
) | ( |
) | ||||
| Property, plant and equipment |
||||||||
| Lease transactions |
||||||||
| Other temporary differences—net |
||||||||
| |
|
|
|
|||||
| Total deferred tax benefit |
¥ | ¥ | ||||||
| |
|
|
|
|||||
24 |
RETIREMENT BENEFITS |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
Present value of unfunded obligations |
¥ | ( |
) | ¥ | ( |
) | ||
Present value of funded obligations |
( |
) | ( |
) | ||||
Fair value of plan assets |
|
|||||||
Net retirement benefit assets (liabilities) before the asset ceiling |
¥ | ¥ | ||||||
Effect of the asset ceiling |
||||||||
Net retirement benefit assets (liabilities) |
¥ | ¥ | ||||||
Of which retirement benefit liabilities included in “Other liabilities” |
¥ | ( |
) | ¥ | ( |
|||
Of which retirement benefit assets included in “Other assets” |
¥ | ¥ | ||||||
For the fiscal year ended March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
At beginning of period |
¥ | |
¥ | |
||||
Current service cost |
||||||||
Interest cost |
||||||||
Actuarial losses (gains)—demographic assumptions |
( |
) | ||||||
Actuarial losses (gains)—financial assumptions |
( |
) | ( |
) | ||||
Actuarial losses (gains)—experience |
||||||||
Benefits paid |
( |
) | ( |
) | ||||
Lump-sum payments |
( |
) | ( |
) | ||||
Past service cost |
( |
) | ||||||
Others |
( |
) | ||||||
At end of period |
¥ | ¥ | ||||||
For the fiscal year ended March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
At beginning of period |
¥ | |
¥ | |
||||
Interest income |
||||||||
Return on plan assets excluding interest income |
( |
) | ||||||
Contributions by employer |
||||||||
Benefits paid |
( |
) | ( |
) | ||||
Others |
( |
) | ( |
) | ||||
At end of period |
¥ | ¥ | ||||||
For the fiscal year ended March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| At beginning of period |
¥ | |
¥ | |
||||
| Interest cost |
||||||||
| Change in the asset ceiling |
||||||||
| |
|
|
|
|||||
| At end of period |
¥ | ¥ | ||||||
| |
|
|
|
|||||
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
| Current service cost |
¥ | ¥ | ¥ | |||||||||
| Net interest cost |
( |
) | ( |
) | ( |
) | ||||||
| Past service cost |
( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|||||||
| Total |
¥ | ¥ | ¥ | |||||||||
| |
|
|
|
|
|
|||||||
At March 31, |
||||||||||||||||||||||||
2025 |
2024 |
|||||||||||||||||||||||
Quoted in active markets |
Other |
Total |
Quoted in active markets |
Other |
Total |
|||||||||||||||||||
(In millions) |
||||||||||||||||||||||||
| Plan assets retained in the pension funds: |
||||||||||||||||||||||||
| Equity instruments |
¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ||||||||||||||||||
| Debt instruments |
||||||||||||||||||||||||
| General account of life insurance companies |
||||||||||||||||||||||||
| Other investments and short-term assets |
||||||||||||||||||||||||
| Plan assets retained in the retirement benefit trusts: |
||||||||||||||||||||||||
| Equity instruments |
||||||||||||||||||||||||
| Other short-term assets |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
¥ | |
¥ | |
¥ | ¥ | |
¥ | ¥ | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
At March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
| Discount rates |
% | % | % | |||||||||
At March 31, |
||||||||
2025 |
2024 |
|||||||
Increase/(decrease) |
Increase/(decrease) |
|||||||
(In millions) |
||||||||
| Discount rates: |
||||||||
| Increase by bps |
¥ | ( |
) | ¥ | ( |
) | ||
| Decrease by bps |
||||||||
| Average life expectancy at age 60: |
||||||||
| Increase of |
¥ | ¥ | ||||||
At March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(Years) |
||||||||||||
| Lump-sum severance indemnity plans |
||||||||||||
| Defined benefit pension plans |
||||||||||||
25 |
SHAREHOLDERS’ EQUITY |
For the fiscal year ended March 31, |
||||||||||||||||||||||||
2025 |
2024 (1) |
2023 (1) |
||||||||||||||||||||||
Outstanding |
In treasury |
Outstanding |
In treasury |
Outstanding |
In treasury |
|||||||||||||||||||
| At beginning of period |
||||||||||||||||||||||||
| Net change |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| At end of period |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) | As resolved by the board of directors on May 15, 2024, the Company implemented a stock split of its common stock with an effective date of October 1, 2024, whereby each share of common stock owned by shareholders listed or recorded in the closing register of shareholders on the record date of September 30, 2024 was split into three shares. The number of common stock outstanding and in treasury are calculated based on the assumption that the stock split had been implemented at the beginning of the fiscal year ended March 31, 2023. |
At March 31, 2025 |
At March 31, 2024 |
|||||||||||||||
Authorized |
Issued |
Authorized |
Issued |
|||||||||||||
| Type 5 preferred stock |
||||||||||||||||
| Type 7 preferred stock |
||||||||||||||||
| Type 8 preferred stock |
||||||||||||||||
| Type 9 preferred stock |
||||||||||||||||
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
| At beginning of period |
¥ |
¥ |
¥ |
|||||||||
| Gains (losses) arising during the period, before tax |
( |
) |
||||||||||
| Income tax (expense) benefit for changes arising during the period |
( |
) |
( |
) | ||||||||
| Amount attributable to non-controlling interests |
( |
) |
( |
) | ||||||||
| Share of other comprehensive income (loss) of associates and joint ventures |
( |
) |
||||||||||
| Transfer from other reserves to retained earnings |
( |
) |
( |
) |
( |
) | ||||||
| |
|
|
|
|
|
|||||||
| At end of period |
¥ |
¥ |
¥ |
|||||||||
| |
|
|
|
|
|
|||||||
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
| At beginning of period |
¥ |
¥ |
¥ |
|||||||||
| Gains (losses) arising during the period, before tax |
( |
) | ||||||||||
| Income tax (expense) benefit for changes arising during the period |
( |
) |
( |
) |
||||||||
| Reclassification adjustments for (gains) losses included in net profit, before tax |
||||||||||||
| Income tax (expense) benefit for reclassification adjustments |
( |
) |
( |
) |
( |
) | ||||||
| Amount attributable to non-controlling interests |
( |
) |
( |
) |
||||||||
| Share of other comprehensive income (loss) of associates and joint ventures |
( |
) | ||||||||||
| Transfer from other reserves to retained earnings |
( |
) |
( |
) |
( |
) | ||||||
| |
|
|
|
|
|
|||||||
| At end of period |
¥ |
¥ |
¥ |
|||||||||
| |
|
|
|
|
|
|||||||
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
| At beginning of period |
¥ |
¥ |
¥ |
|||||||||
| Gains (losses) arising during the period, before tax |
( |
) |
||||||||||
| Income tax (expense) benefit for changes arising during the period |
( |
) |
( |
) | ||||||||
| |
|
|
|
|
|
|||||||
| At end of period |
¥ |
¥ |
¥ |
|||||||||
| |
|
|
|
|
|
|||||||
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
| At beginning of period |
¥ |
¥ |
¥ |
|||||||||
| Gains (losses) arising during the period, before tax |
( |
) |
||||||||||
| Income tax (expense) benefit for changes arising during the period |
( |
) |
( |
) |
||||||||
| Reclassification adjustments for (gains) losses included in net profit, before tax |
( |
) |
( |
) |
||||||||
| Income tax (expense) benefit for reclassification adjustments |
( |
) | ||||||||||
| Amount attributable to non-controlling interests |
( |
) |
( |
) | ||||||||
| Share of other comprehensive income (loss) of associates and joint ventures |
||||||||||||
| |
|
|
|
|
|
|||||||
| At end of period |
¥ |
¥ |
¥ |
|||||||||
| |
|
|
|
|
|
|||||||
26 |
EQUITY ATTRIBUTABLE TO OTHER EQUITY INSTRUMENTS HOLDERS |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Perpetual subordinated bonds |
¥ | ¥ | ||||||
| Perpetual subordinated borrowings |
||||||||
| |
|
|
|
|||||
| Total equity attributable to other equity instruments holders |
¥ | ¥ | ||||||
| |
|
|
|
|||||
27 |
NET INTEREST INCOME |
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
| Interest income from: |
||||||||||||
| Deposits with banks (1) |
¥ | ¥ | ¥ | |||||||||
| Call loans and bills bought |
||||||||||||
| Reverse repurchase agreements and cash collateral on securities borrowed |
||||||||||||
| Investment securities |
||||||||||||
| Loans and advances |
||||||||||||
| |
|
|
|
|
|
|||||||
| Total interest income |
||||||||||||
| |
|
|
|
|
|
|||||||
| Interest expense from: |
||||||||||||
| Deposits |
||||||||||||
| Call money and bills sold |
||||||||||||
| Repurchase agreements and cash collateral on securities lent |
||||||||||||
| Borrowings |
||||||||||||
| Debt securities in issue |
||||||||||||
| Premiums for deposit insurance |
||||||||||||
| Others |
||||||||||||
| |
|
|
|
|
|
|||||||
| Total interest expense |
||||||||||||
| |
|
|
|
|
|
|||||||
| Net interest income |
¥ | ¥ | ¥ | |||||||||
| |
|
|
|
|
|
|||||||
| (1) | From the fiscal year ended March 31, 2025, interest income from deposits with the Bank of Japan has been classified as “Interest income from deposits with banks.” Comparative amounts have been reclassified to conform to the current presentation. |
28 |
NET FEE AND COMMISSION INCOME |
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
| Fee and commission income from: |
||||||||||||
| Loans |
¥ |
¥ |
¥ |
|||||||||
| Credit card business |
||||||||||||
| Guarantees |
||||||||||||
| Securities-related business |
||||||||||||
| Deposits |
||||||||||||
| Remittances and transfers |
||||||||||||
| Safe deposits |
||||||||||||
| Trust fees |
||||||||||||
| Investment trusts |
||||||||||||
| Agency |
||||||||||||
| Others |
||||||||||||
| |
|
|
|
|
|
|||||||
| Total fee and commission income |
||||||||||||
| |
|
|
|
|
|
|||||||
| Fee and commission expense from: |
||||||||||||
| Remittances and transfers |
||||||||||||
| Others |
||||||||||||
| |
|
|
|
|
|
|||||||
| Total fee and commission expense |
||||||||||||
| |
|
|
|
|
|
|||||||
| Net fee and commission income |
¥ |
¥ |
¥ |
|||||||||
| |
|
|
|
|
|
|||||||
29 |
NET TRADING INCOME (LOSS) |
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
| Interest rate |
¥ |
( |
) |
¥ |
¥ |
|||||||
| Foreign exchange |
( |
) |
||||||||||
| Equity |
( |
) | ||||||||||
| Credit |
( |
) |
( |
) |
( |
) | ||||||
| Others |
( |
) |
||||||||||
| |
|
|
|
|
|
|||||||
| Total net trading income (loss) |
¥ |
( |
) |
¥ |
¥ |
|||||||
| |
|
|
|
|
|
|||||||
30 |
NET INCOME FROM FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS |
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
| Net income from financial assets mandatorily at fair value through profit or loss: |
||||||||||||
| Net income from debt instruments |
¥ |
¥ |
¥ |
|||||||||
| Net income (loss) from equity instruments |
( |
) |
||||||||||
| Net income (loss) from financial liabilities designated at fair value through profit or loss |
( |
) |
||||||||||
| |
|
|
|
|
|
|||||||
| Total net income from financial assets and liabilities at fair value through profit or loss |
¥ |
¥ |
¥ |
|||||||||
| |
|
|
|
|
|
|||||||
31 |
NET INVESTMENT INCOME |
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
| Net loss from disposal of debt instruments |
¥ |
( |
) |
¥ |
( |
) |
¥ |
( |
) | |||
| Dividend income |
||||||||||||
| |
|
|
|
|
|
|||||||
| Total net investment income |
¥ |
¥ |
¥ |
|||||||||
| |
|
|
|
|
|
|||||||
32 |
NET GAINS (LOSSES) ARISING FROM DERECOGNITION OF FINANCIAL ASSETS AT AMORTIZED COST |
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
Gains |
¥ | ¥ | ¥ | |||||||||
Losses (1) |
||||||||||||
Total net gains (losses) arising from derecognition of financial assets at amortized cost |
¥ | ( |
) | ¥ | (2) |
¥ | ( |
) (2) | ||||
| (1) | Losses from the derecognition of financial assets measured at amortized cost for the fiscal year ended March 31, 2025 were mainly due to the sales of certain low-profit loans in the Europe and Middle East region. These sales were made to improve profitability and capital efficiency in global business. |
| (2) | The comparative amounts of “Gains” and “Losses” from derecognition of financial assets at amortized cost have been reclassified from “Other income” and “Other expenses,” respectively, to conform to the current presentation. |
33 |
OTHER INCOME |
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
Income from operating leases |
¥ |
¥ |
¥ |
|||||||||
Income related to IT solution services |
||||||||||||
Gains on disposal of property, plant and equipment, and other intangible assets |
||||||||||||
Reversal of impairment losses of investments in associates and joint ventures |
||||||||||||
Gains on step acquisition of subsidiaries |
— |
|||||||||||
Others |
||||||||||||
Total other income |
¥ |
¥ |
¥ |
|||||||||
34 |
IMPAIRMENT CHARGES ON FINANCIAL ASSETS |
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
Loans and advances |
¥ |
¥ |
¥ |
|||||||||
Loan commitments |
( |
) |
||||||||||
Financial guarantees |
( |
) |
||||||||||
Investment securities |
— |
— |
||||||||||
Total impairment charges on financial assets |
¥ |
¥ |
¥ |
|||||||||
35 |
GENERAL AND ADMINISTRATIVE EXPENSES |
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
Personnel expenses |
¥ |
¥ |
¥ |
|||||||||
Depreciation and amortization |
||||||||||||
Building and maintenance expenses |
||||||||||||
Supplies expenses |
||||||||||||
Communication expenses |
||||||||||||
Publicity and advertising expenses |
||||||||||||
Taxes and dues |
||||||||||||
Outsourcing expenses |
||||||||||||
Office equipment expenses |
||||||||||||
Others |
||||||||||||
Total general and administrative expenses |
¥ |
¥ |
¥ |
|||||||||
36 |
OTHER EXPENSES |
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
Cost of operating leases |
¥ |
¥ |
¥ |
|||||||||
Cost related to IT solution services and IT systems |
||||||||||||
Provision for interest repayment |
||||||||||||
Losses on disposal of property, plant and equipment, and other intangible assets |
||||||||||||
Impairment losses of property, plant and equipment |
||||||||||||
Impairment losses of intangible assets |
||||||||||||
Losses on sales of investments in subsidiaries and associates (1) |
||||||||||||
Impairment losses of investments in associates and joint ventures (2)(3) (4) |
||||||||||||
Losses on step acquisition of subsidiaries |
— |
|||||||||||
Others |
||||||||||||
Total other expenses |
¥ |
¥ |
¥ |
|||||||||
| (1) | For the fiscal year ended March 31, 2024, the Group recognized a loss on sales of investments in subsidiaries and associates of ¥ |
| (2) | For the fiscal years ended March 31, 2024 and 2023, the Group recognized an impairment loss of ¥ |
| (3) | For the fiscal years ended March 31, 2025 and 2024, the Group recognized an impairment loss of ¥ |
| (4) | For the fiscal year ended March 31, 2025, the Group recognized an impairment loss of ¥ |
37 |
INCOME TAX EXPENSE |
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
Current tax: |
||||||||||||
Charge for period (1) |
¥ |
¥ |
¥ |
|||||||||
Deferred tax: |
||||||||||||
Origination and reversal of temporary differences |
( |
) |
( |
) |
||||||||
Change in the write-down of deferred tax assets on the current fiscal year income tax expense |
( |
) |
( |
) | ||||||||
Changes in Japanese corporation tax rates (2) |
( |
) |
||||||||||
Total deferred tax expense (benefit) |
( |
) |
( |
) |
||||||||
Total income tax expense |
¥ |
¥ |
¥ |
|||||||||
| (1) | As a result of the adoption of IFRS 9, the current income tax expenses of ¥ |
| (2) | Refer to Note 23 “Deferred Income Tax” for additional information on changes in Japanese corporation tax rates. |
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions, except percentages) |
||||||||||||
Profit before tax |
¥ | ¥ | |
¥ | |
|||||||
Income tax expense |
||||||||||||
Effective income tax rate |
||||||||||||
Effective statutory tax rate in Japan (1) |
||||||||||||
Tax impact of share of post-tax profit in associates and joint ventures |
( |
) | ( |
) | ( |
) | ||||||
Tax impact of impairment losses and reversal of impairment losses for investments in associates and joint ventures—net |
||||||||||||
Non-Japanese earnings |
( |
) | ( |
) | ( |
) | ||||||
Nontaxable dividends received |
( |
) | ( |
) | ( |
) | ||||||
Changes in Japanese corporation tax rates (1) |
( |
) | — | — | ||||||||
Tax impact of impairment losses of goodwill |
— | |||||||||||
Effect of the change in the write-down of deferred tax assets on the current fiscal year income tax expense |
( |
) | ( |
) | ||||||||
Others—net |
( |
) | ( |
) | ||||||||
Effective income tax rate |
||||||||||||
| (1) | The effective statutory tax rate in Japan for the fiscal years ended March 31, 2025, 2024 and 2023 is the aggregate of the effective corporation tax rate of |
38 |
EARNINGS PER SHARE |
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions, except number of shares and per share data) |
||||||||||||
Basic: |
||||||||||||
Profit attributable to shareholders of the Company |
¥ |
¥ |
¥ |
|||||||||
Weighted average number of common stock in issue (in thousands of shares) |
||||||||||||
Basic earnings per share |
¥ |
¥ |
¥ |
|||||||||
Diluted: |
||||||||||||
Profit attributable to the common shareholders of the Company |
¥ |
¥ |
¥ |
|||||||||
Impact of dilutive potential ordinary shares issued by subsidiaries and associates |
( |
) |
— |
— |
||||||||
Net profit used to determine diluted earnings per share |
¥ |
¥ |
¥ |
|||||||||
Weighted average number of common stock in issue (in thousands of shares) |
||||||||||||
Adjustments for stock options (in thousands of shares) |
||||||||||||
Weighted average number of common stock for diluted earnings per share (in thousands of shares) |
||||||||||||
Diluted earnings per share |
¥ |
¥ |
¥ |
|||||||||
39 |
TRANSFERS OF FINANCIAL ASSETS |
At March 31, 2025 |
||||||||||||
Repurchase agreements and securities lending transactions |
Loans and advances |
|||||||||||
Residential mortgages |
Corporate loans |
|||||||||||
(In millions) |
||||||||||||
| Carrying amount of assets |
¥ | ¥ | ¥ | |||||||||
| Carrying amount of associated liabilities |
||||||||||||
| For those liabilities that have recourse only to the transferred assets: |
||||||||||||
| Fair value of assets |
¥ | ¥ | ¥ | |||||||||
| Fair value of associated liabilities |
||||||||||||
| |
|
|
|
|
|
|||||||
| Net position |
¥ | ¥ | ¥ | |||||||||
| |
|
|
|
|
|
|||||||
At March 31, 2024 |
||||||||||||
Repurchase agreements and securities lending transactions |
Loans and advances |
|||||||||||
Residential mortgages |
Corporate loans |
|||||||||||
(In millions) |
||||||||||||
| Carrying amount of assets |
¥ | ¥ | ¥ | |||||||||
| Carrying amount of associated liabilities |
||||||||||||
| For those liabilities that have recourse only to the transferred assets: |
||||||||||||
| Fair value of assets |
¥ | ¥ | ¥ | |||||||||
| Fair value of associated liabilities |
||||||||||||
| |
|
|
|
|
|
|||||||
| Net position |
¥ | ¥ | ¥ | |||||||||
| |
|
|
|
|
|
|||||||
40 |
ASSETS PLEDGED AND RECEIVED AS COLLATERAL |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Cash and deposits with banks |
¥ | ¥ | ||||||
| Trading assets |
||||||||
| Debt instruments at amortized cost |
||||||||
| Debt instruments at fair value through other comprehensive income |
||||||||
| Equity instruments at fair value through other comprehensive income |
||||||||
| Loans and advances |
||||||||
| Others |
||||||||
| |
|
|
|
|||||
| Total |
¥ | ¥ | ||||||
| |
|
|
|
|||||
41 |
SHARE-BASED PAYMENT |
Title of grantees |
Exercise period |
Requisite service period |
Method of settlement | |||||
SMFG Stock Acquisition Rights |
(1) |
| (1) | A stock acquisition rights holder can exercise the rights from the day they are relieved of their positions either as a director, a corporate auditor or an executive officer (“Start of Exercise Date”) to |
For the fiscal year ended March 31, |
||||||||||||||||
2025 |
2024 |
|||||||||||||||
Number of options (1) (2) |
Weighted average exercise price |
Number of options (1) (2) |
Weighted average exercise price |
|||||||||||||
Outstanding at beginning of period |
¥ | ¥ | ||||||||||||||
Exercised |
( |
) | ( |
) | ||||||||||||
Outstanding at end of period |
¥ | ¥ | ||||||||||||||
Exercisable at end of period |
¥ | ¥ | ||||||||||||||
| (1) | Number of options is the number of SMFG’s common stock granted by the exercise of stock options. |
| (2) | As resolved by the board of directors on May 15, 2024, the Company implemented a stock split of its common stock with an effective date of October 1, 2024, whereby each share of common stock owned by shareholders listed or recorded in the closing register of shareholders on the record date of September 30, 2024 was split into three shares. Number of options is calculated based on the assumption that the stock split had been implemented at the beginning of the fiscal year ended March 31, 2024. |
At March 31, |
||||||||||||||||||||
2025 |
2024 |
|||||||||||||||||||
Exercise price |
Number of options (1) |
Remaining contractual lives in years |
Number of options (1) |
Remaining contractual lives in years |
||||||||||||||||
SMFG Stock Acquisition Rights |
¥ | |||||||||||||||||||
| (1) | As resolved by the board of directors on May 15, 2024, the Company implemented a stock split of its common stock with an effective date of October 1, 2024, whereby each share of common stock owned by shareholders listed or recorded in the closing register of shareholders on the record date of September 30, 2024 was split into three shares. Number of options is calculated based on the assumption that the stock split had been implemented at the beginning of the fiscal year ended March 31, 2024. |
For the fiscal year ended March 31, |
||||||||
2025 |
2024 |
|||||||
| Outstanding at beginning of period (1) |
||||||||
| Allotted (1) |
||||||||
| Released (1) |
( |
) | ( |
) | ||||
| Forfeited (1) |
( |
) | ||||||
| |
|
|
|
|||||
| Outstanding at end of period (1) |
||||||||
| |
|
|
|
|||||
| Fair value at measurement date (1) |
¥ | ¥ | ||||||
| |
|
|
|
|||||
| (1) | As resolved by the board of directors on May 15, 2024, the Company implemented a stock split of its common stock with an effective date of October 1, 2024, whereby each share of common stock owned by shareholders listed or recorded in the closing register of shareholders on the record date of September 30, 2024 was split into three shares. Number of restricted shares and fair value at measurement date are calculated based on the assumption that the stock split had been implemented at the beginning of the fiscal year ended March 31, 2024. |
42 |
DIVIDENDS PER SHARE |
Dividends per share |
Aggregate amount |
|||||||
(In yen) |
(In millions) |
|||||||
| For the fiscal year ended March 31, 2025: |
||||||||
| Common stock |
¥ | ¥ | ||||||
| For the fiscal year ended March 31, 2024: |
||||||||
| Common stock |
¥ | ¥ | ||||||
| For the fiscal year ended March 31, 2023: |
||||||||
| Common stock |
¥ | ¥ | ||||||
43 |
CONTINGENCY AND CAPITAL COMMITMENTS |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Loan commitments |
¥ | ¥ | ||||||
| Financial guarantees and other credit-related contingent liabilities |
||||||||
| |
|
|
|
|||||
| Total |
¥ | ¥ | ||||||
| |
|
|
|
|||||
44 |
ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES BY MEASUREMENT BASIS |
At March 31, 2025 |
||||||||||||||||||||
Financial assets and liabilities at fair value through profit or loss |
Financial assets and liabilities at amortized cost |
Debt instruments at fair value through other comprehensive income |
Equity instruments at fair value through other comprehensive income |
Total |
||||||||||||||||
(In millions) |
||||||||||||||||||||
| Financial assets: |
||||||||||||||||||||
| Cash and deposits with banks |
¥ | ¥ | ¥ | ¥ | ¥ | |||||||||||||||
| Call loans and bills bought |
||||||||||||||||||||
| Reverse repurchase agreements and cash collateral on securities borrowed |
||||||||||||||||||||
| Trading assets |
||||||||||||||||||||
| Derivative financial instruments |
||||||||||||||||||||
| Financial assets at fair value through profit or loss |
||||||||||||||||||||
| Investment securities |
||||||||||||||||||||
| Loans and advances |
||||||||||||||||||||
| Other financial assets (1) |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
¥ | ¥ | ¥ | ¥ | ¥ | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Financial liabilities: |
||||||||||||||||||||
| Deposits (2) |
¥ | ( |
) | ¥ | ¥ | ¥ | ¥ | |||||||||||||
| Call money and bills sold |
||||||||||||||||||||
| Repurchase agreements and cash collateral on securities lent |
||||||||||||||||||||
| Trading liabilities |
||||||||||||||||||||
| Derivative financial instruments |
||||||||||||||||||||
| Financial liabilities designated at fair value through profit or loss |
||||||||||||||||||||
| Borrowings (2) |
( |
) | ||||||||||||||||||
| Debt securities in issue (2) |
( |
) | ||||||||||||||||||
| Other financial liabilities (1) |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
¥ | ¥ | ¥ | ¥ | ¥ | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
At March 31, 2024 |
||||||||||||||||||||
Financial assets and liabilities at fair value through profit or loss |
Financial assets and liabilities at amortized cost |
Debt instruments at fair value through other comprehensive income |
Equity instruments at fair value through other comprehensive income |
Total |
||||||||||||||||
(In millions) |
||||||||||||||||||||
| Financial assets: |
||||||||||||||||||||
| Cash and deposits with banks |
¥ | — | ¥ | ¥ | — | ¥ | — | ¥ | ||||||||||||
| Call loans and bills bought |
— | — | — | |||||||||||||||||
| Reverse repurchase agreements and cash collateral on securities borrowed |
— | — | — | |||||||||||||||||
| Trading assets |
— | — | — | |||||||||||||||||
| Derivative financial instruments |
— | — | — | |||||||||||||||||
| Financial assets at fair value through profit or loss |
— | — | — | |||||||||||||||||
| Investment securities |
— | |||||||||||||||||||
| Loans and advances |
— | — | — | |||||||||||||||||
| Other financial assets (1) |
— | — | — | |||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
¥ | ¥ | ¥ | ¥ | ¥ | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Financial liabilities: |
||||||||||||||||||||
| Deposits (2) |
¥ | ( |
) | ¥ | ¥ | — | ¥ | — | ¥ | |||||||||||
| Call money and bills sold |
— | — | — | |||||||||||||||||
At March 31, 2024 |
||||||||||||||||||||
Financial assets and liabilities at fair value through profit or loss |
Financial assets and liabilities at amortized cost |
Debt instruments at fair value through other comprehensive income |
Equity instruments at fair value through other comprehensive income |
Total |
||||||||||||||||
(In millions) |
||||||||||||||||||||
| Repurchase agreements and cash collateral on securities lent |
— | — | — | |||||||||||||||||
| Trading liabilities |
— | — | — | |||||||||||||||||
| Derivative financial instruments |
— | — | — | |||||||||||||||||
| Financial liabilities designated at fair value through profit or loss |
— | — | — | |||||||||||||||||
| Borrowings (2) |
( |
) | — | — | ||||||||||||||||
| Debt securities in issue (2) |
— | — | ||||||||||||||||||
| Other financial liabilities (1) |
— | — | — | |||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
¥ | ¥ | ¥ | — | ¥ | — | ¥ | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | Other financial assets and liabilities comprise of those included in other assets and liabilities, which meet the definition of a financial asset and liability. |
| (2) | Embedded derivatives, which are separately accounted for, but presented together with the host contract in the consolidated statements of financial position, are disclosed in this table within the category of “Financial assets and liabilities at fair value through profit or loss.” Although the separated embedded derivatives may have a positive or a negative fair value, they have been presented in this table as liabilities to be consistent with the line of the host contract. |
45 |
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES |
| • | quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date (Level 1); |
| • | inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (Level 2); and |
| • | significant unobservable inputs for the asset or liability (Level 3). |
At March 31, 2025 |
||||||||||||||||
Level 1 (1) |
Level 2 (1) |
Level 3 |
Total |
|||||||||||||
(In millions) |
||||||||||||||||
| Financial assets: |
||||||||||||||||
| Trading assets: |
||||||||||||||||
| Debt instruments |
¥ | ¥ | ¥ | ¥ | ||||||||||||
| Equity instruments |
— | |||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total trading assets |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Derivative financial instruments: |
||||||||||||||||
| Interest rate derivatives |
||||||||||||||||
| Currency derivatives |
— | |||||||||||||||
| Equity derivatives |
||||||||||||||||
| Commodity derivatives |
— | |||||||||||||||
| Credit derivatives |
— | |||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total derivative financial instruments |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Financial assets at fair value through profit or loss: |
||||||||||||||||
| Debt instruments |
||||||||||||||||
| Equity instruments |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total financial assets at fair value through profit or loss |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Investment securities at fair value through other comprehensive income: |
||||||||||||||||
| Japanese government bonds |
— | — | ||||||||||||||
| U.S. Treasury and other U.S. government agency bonds |
— | |||||||||||||||
| Other debt instruments |
— | |||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total debt instruments |
— | |||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Equity instruments |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total investment securities at fair value through other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| |
|
|
|
|
|
|
|
|||||||||
| Total |
¥ | ¥ | ¥ | ¥ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
At March 31, 2025 |
||||||||||||||||
Level 1 (1) |
Level 2 (1) |
Level 3 |
Total |
|||||||||||||
(In millions) |
||||||||||||||||
| Financial liabilities: |
||||||||||||||||
| Trading liabilities: |
||||||||||||||||
| Debt instruments |
¥ | ¥ | ¥ | — | ¥ | |||||||||||
| Equity instruments |
— | |||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total trading liabilities |
— | |||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Derivative financial instruments: |
||||||||||||||||
| Interest rate derivatives |
||||||||||||||||
| Currency derivatives |
||||||||||||||||
| Equity derivatives |
||||||||||||||||
| Commodity derivatives |
— | |||||||||||||||
| Credit derivatives |
— | |||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total derivative financial instruments |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Financial liabilities designated at fair value through profit or loss |
— | |||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Others (2) |
— | ( |
) | ( |
) | ( |
) | |||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total |
¥ | ¥ | ¥ | ¥ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
At March 31, 2024 |
||||||||||||||||
Level 1 (1) |
Level 2 (1) |
Level 3 |
Total |
|||||||||||||
(In millions) |
||||||||||||||||
| Financial assets: |
||||||||||||||||
| Trading assets: |
||||||||||||||||
| Debt instruments |
¥ | ¥ | ¥ | — | ¥ | |||||||||||
| Equity instruments |
— | |||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total trading assets |
— | |||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Derivative financial instruments: |
||||||||||||||||
| Interest rate derivatives |
||||||||||||||||
| Currency derivatives |
— | |||||||||||||||
| Equity derivatives |
||||||||||||||||
| Commodity derivatives |
— | |||||||||||||||
| Credit derivatives |
— | |||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total derivative financial instruments |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Financial assets at fair value through profit or loss: |
||||||||||||||||
| Debt instruments |
||||||||||||||||
| Equity instruments |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total financial assets at fair value through profit or loss |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Investment securities at fair value through other comprehensive income: |
||||||||||||||||
| Japanese government bonds |
— | — | ||||||||||||||
| U.S. Treasury and other U.S. government agency bonds |
— | — | ||||||||||||||
| Other debt instruments |
— | |||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total debt instruments |
— | |||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Equity instruments |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total investment securities at fair value through other comprehensive income |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total |
¥ | ¥ | ¥ | ¥ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
At March 31, 2024 |
||||||||||||||||
Level 1 (1) |
Level 2 (1) |
Level 3 |
Total |
|||||||||||||
(In millions) |
||||||||||||||||
Financial liabilities: |
||||||||||||||||
Trading liabilities: |
||||||||||||||||
Debt instruments |
¥ | ¥ | ¥ | — | ¥ | |||||||||||
Equity instruments |
— | |||||||||||||||
Total trading liabilities |
— | |||||||||||||||
Derivative financial instruments: |
||||||||||||||||
Interest rate derivatives |
||||||||||||||||
Currency derivatives |
||||||||||||||||
Equity derivatives |
||||||||||||||||
Commodity derivatives |
— | |||||||||||||||
Credit derivatives |
— | |||||||||||||||
Total derivative financial instruments |
||||||||||||||||
Financial liabilities designated at fair value through profit or loss |
— | |||||||||||||||
Others (2) |
— | ( |
) | ( |
) | ( |
) | |||||||||
Total |
¥ | ¥ | ¥ | ¥ | ||||||||||||
| (1) | Transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of the period. There were no significant transfers between Level 1 and Level 2 for the fiscal years ended March 31, 2025 and 2024. |
| (2) | Derivatives embedded in financial liabilities, except for financial liabilities designated at fair value through profit or loss, are separately accounted for, but presented together with the host contract in the consolidated statements of financial position. In these tables, the separated embedded derivatives whose host contracts are carried at amortized cost are presented within others. Although the separated embedded derivatives may have a positive or a negative fair value, they have been presented in these tables as liabilities to be consistent with the host contract. The separated embedded derivatives are measured at fair value using the valuation techniques described in “Derivative financial instruments (including embedded derivatives)” below. |
Total gains (losses) |
Purchases |
Sales |
Issuances |
Settlement (1) |
Transfers into Level 3 (2) |
Transfers out of Level 3 (2) |
At March 31, 2025 |
Changes in unrealized gains (losses) included in profit or loss related to assets and liabilities held at March 31, 2025 |
||||||||||||||||||||||||||||||||||||
At April 1, 2024 |
Included in profit or loss |
Included in other comprehensive income |
||||||||||||||||||||||||||||||||||||||||||
(In millions) |
||||||||||||||||||||||||||||||||||||||||||||
Trading assets: |
||||||||||||||||||||||||||||||||||||||||||||
Debt instruments |
¥ |
— |
¥ |
¥ |
¥ |
¥ |
¥ |
¥ |
¥ |
¥ |
¥ |
¥ |
||||||||||||||||||||||||||||||||
Total trading assets |
— |
|||||||||||||||||||||||||||||||||||||||||||
Derivative financial instruments—net: |
||||||||||||||||||||||||||||||||||||||||||||
Interest rate derivatives—net |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||||||||||||||||||||||||||||
Currency derivatives—net |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||||||||||||||||||||||||||||||
Equity derivatives—net |
( |
) |
||||||||||||||||||||||||||||||||||||||||||
Credit derivatives—net |
( |
) |
( |
) | ||||||||||||||||||||||||||||||||||||||||
Total derivative financial instruments—net |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||||||||||
Financial assets at fair value through profit or loss: |
||||||||||||||||||||||||||||||||||||||||||||
Debt instruments |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||||||||||||||||||||||||||
Equity instruments |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||||||||||||||||||||||||||||
Total financial assets at fair value through profit or loss |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||||||||||||||||||||||||||
Investment securities at fair value through other comprehensive income: |
||||||||||||||||||||||||||||||||||||||||||||
Equity instruments |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||||||||||
Total investment securities at fair value through other comprehensive income |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||||||||||
Financial liabilities designated at fair value through profit or loss |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||||||||||
Others (3) —liabilities |
( |
) |
||||||||||||||||||||||||||||||||||||||||||
Total |
¥ |
¥ |
( |
) |
¥ |
¥ |
¥ |
( |
) |
¥ |
( |
) |
¥ |
( |
) |
¥ |
¥ |
( |
) |
¥ |
¥ |
|||||||||||||||||||||||
Total gains (losses) |
Purchases |
Sales |
Issuances |
Settlement (1) |
Transfers into Level 3 (2) |
Transfers out of Level 3 (2) |
At March 31, 2024 |
Changes in unrealized gains (losses) included in profit or loss related to assets and liabilities held at March 31, 2024 |
||||||||||||||||||||||||||||||||||||
At April 1, 2023 |
Included in profit or loss |
Included in other comprehensive income |
||||||||||||||||||||||||||||||||||||||||||
(In millions) |
||||||||||||||||||||||||||||||||||||||||||||
Derivative financial instruments—net: |
||||||||||||||||||||||||||||||||||||||||||||
Interest rate derivatives—net |
¥ |
( |
) |
¥ |
( |
) |
¥ |
— |
¥ |
¥ |
( |
) |
¥ |
— |
¥ |
— |
¥ |
— |
¥ |
— |
¥ |
( |
) |
¥ |
||||||||||||||||||||
Currency derivatives—net |
( |
) |
— |
( |
) |
— |
— |
— |
— |
( |
) |
|||||||||||||||||||||||||||||||||
Equity derivatives—net |
( |
) |
— |
( |
) |
— |
— |
— |
— |
|||||||||||||||||||||||||||||||||||
Credit derivatives—net |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||||||||||||
Total derivative financial instruments—net |
( |
) |
— |
( |
) |
— |
— |
— |
— |
|||||||||||||||||||||||||||||||||||
Financial assets at fair value through profit or loss: |
||||||||||||||||||||||||||||||||||||||||||||
Debt instruments |
( |
) |
— |
( |
) |
— |
( |
) |
||||||||||||||||||||||||||||||||||||
Equity instruments |
( |
) |
— |
( |
) |
— |
( |
) |
— |
( |
) |
( |
) | |||||||||||||||||||||||||||||||
Total financial assets at fair value through profit or loss |
( |
) |
— |
( |
) |
— |
( |
) |
||||||||||||||||||||||||||||||||||||
Investment securities at fair value through other comprehensive income: |
||||||||||||||||||||||||||||||||||||||||||||
Equity instruments |
— |
( |
) |
— |
( |
) |
( |
) |
— |
|||||||||||||||||||||||||||||||||||
Total investment securities at fair value through other comprehensive income |
— |
( |
) |
— |
( |
) |
( |
) |
— |
|||||||||||||||||||||||||||||||||||
Financial liabilities designated at fair value through profit or loss |
( |
) |
( |
) |
( |
) |
— |
— |
( |
) |
— |
— |
( |
) |
( |
) | ||||||||||||||||||||||||||||
Others (3) —liabilities |
( |
) |
— |
— |
— |
— |
— |
— |
( |
) |
( |
) | ||||||||||||||||||||||||||||||||
Total |
¥ |
¥ |
¥ |
¥ |
¥ |
( |
) |
¥ |
( |
) |
¥ |
¥ |
¥ |
( |
) |
¥ |
¥ |
|||||||||||||||||||||||||||
| (1) | Settlements for equity instruments include redemption of preferred stocks and receipt of cash distributions which represent a return of investment. |
| (2) | Transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of the period. For the fiscal year ended March 31, 2025, transfers into Level 3 amounted to ¥ million. These transfers into Level 3 were primarily due to an increase in significance of unobservable inputs of certain trading assets. For the fiscal years ended March 31, 2025 and 2024, transfers out of Level 3 amounted to ¥ |
| (3) | Derivatives embedded in financial liabilities, except for financial liabilities designated at fair value through profit or loss, are separately accounted for, but presented together with the host contract in the consolidated statements of financial position. In these tables, the separated embedded derivatives whose host contracts are carried at amortized cost are presented within others. Although the separated embedded derivatives may have a positive or a negative fair value, they have been presented in these tables as liabilities to be consistent with the host contract. |
Total gains (losses) included in profit or loss for the fiscal year ended March 31, |
Changes in unrealized gains (losses) included in profit or loss related to assets and liabilities held at March 31, |
|||||||||||||||
2025 |
2024 |
2025 |
2024 |
|||||||||||||
(In millions) |
||||||||||||||||
| Net interest income |
¥ | ¥ | ¥ | ¥ | ||||||||||||
| Net trading income (loss) |
( |
) | ||||||||||||||
| Net income (loss) from financial assets and liabilities at fair value through profit or loss |
( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total |
¥ | ( |
) | ¥ | ¥ | ¥ | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
For the fiscal year ended March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Balance at beginning of period |
¥ | ¥ | ||||||
| Increase due to new trades |
||||||||
| Reduction due to redemption, sales or passage of time |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Balance at end of period |
¥ | ¥ | ||||||
| |
|
|
|
|||||
At March 31, 2025 | ||||||||||||||
Assets |
Liabilities |
Valuation technique(s) (1) |
Significant unobservable inputs (1) |
Range of inputs (1) | ||||||||||
(In millions) |
||||||||||||||
Trading assets: |
||||||||||||||
Debt instruments |
¥ | ¥ | DCF model | Discount margin | ||||||||||
Derivative financial instruments: |
||||||||||||||
Interest rate derivatives |
Option model | Interest rate to interest rate correlation | ||||||||||||
| Quanto correlation | ||||||||||||||
| Foreign exchange volatility | ||||||||||||||
Currency derivatives |
Option model | Interest rate to interest rate correlation | ||||||||||||
| Quanto correlation | ||||||||||||||
| Foreign exchange volatility | ||||||||||||||
Equity derivatives |
Option model | Equity to equity correlation | ||||||||||||
| Equity volatility | ||||||||||||||
Credit derivatives |
Credit Default model | Quanto correlation | ||||||||||||
Financial assets at fair value through profit or loss: |
||||||||||||||
Debt instruments |
— | Option model | Foreign exchange volatility | |||||||||||
| DCF model | Probability of default rate | |||||||||||||
| Loss given default rate | ||||||||||||||
| Discount margin | ||||||||||||||
| Net asset value (2) |
— | — | ||||||||||||
Equity instruments |
— | Market multiples | Price/Book value multiple | |||||||||||
| Liquidity discount | ||||||||||||||
| DCF model | Probability of default rate | |||||||||||||
| Loss given default rate | ||||||||||||||
| See note (3) below | — | — | ||||||||||||
Investment securities at fair value through other comprehensive income: |
||||||||||||||
Equity instruments |
— | Market multiples | Price/Book value multiple | |||||||||||
| Liquidity discount | ||||||||||||||
| See note (3) below | — | — | ||||||||||||
Financial liabilities designated at fair value through profit or loss |
— | Option model | Equity to equity correlation | |||||||||||
| Interest rate to interest rate correlation |
||||||||||||||
| Quanto correlation | ||||||||||||||
| Equity volatility | ||||||||||||||
| Credit Default model | Quanto correlation | |||||||||||||
Others (4) |
— | ( |
) | Option model | Interest rate to interest rate correlation | |||||||||
| Quanto correlation | ||||||||||||||
| Foreign exchange volatility | ||||||||||||||
| Credit Default model | Quanto correlation | |||||||||||||
At March 31, 2024 | ||||||||||||||
Assets |
Liabilities |
Valuation technique(s) (1) |
Significant unobservable inputs (1) |
Range of inputs (1) | ||||||||||
(In millions) |
||||||||||||||
Derivative financial instruments: |
||||||||||||||
Interest rate derivatives |
¥ | ¥ | Option model | Interest rate to interest rate correlation | ||||||||||
| Quanto correlation | ( | |||||||||||||
| Foreign exchange volatility | ||||||||||||||
Currency derivatives |
Option model | Interest rate to interest rate correlation | ||||||||||||
| Quanto correlation | ||||||||||||||
| Foreign exchange volatility | ||||||||||||||
Equity derivatives |
Option model | Equity to equity correlation | ||||||||||||
| Quanto correlation | ( | |||||||||||||
| Equity volatility | ||||||||||||||
Credit derivatives |
Credit Default model | Quanto correlation | ||||||||||||
Financial assets at fair value through profit or loss: |
||||||||||||||
Debt instruments |
— | Option model | Foreign exchange volatility | |||||||||||
| DCF model | Probability of default rate | |||||||||||||
| Loss given default rate | ||||||||||||||
| Discount margin | ||||||||||||||
| Net asset value (2) |
— | — | ||||||||||||
Equity instruments |
— | Market multiples | Price/Book value multiple | |||||||||||
| Liquidity discount | ||||||||||||||
| DCF model | Probability of default rate | |||||||||||||
| Loss given default rate | ||||||||||||||
| See note (3) below | — | — | ||||||||||||
Investment securities at fair value through other comprehensive income: |
||||||||||||||
Equity instruments |
— | Market multiples | Price/Book value multiple | |||||||||||
| Liquidity discount | ||||||||||||||
| See note (3) below | — | — | ||||||||||||
Financial liabilities designated at fair value through profit or loss |
— | Option model | Equity to equity correlation | |||||||||||
| Interest rate to interest rate correlation | ||||||||||||||
| Quanto correlation | ( | |||||||||||||
| Equity volatility | ||||||||||||||
| Credit Default model | Quanto correlation | |||||||||||||
Others (4) |
— | ( |
) | Option model | Interest rate to interest rate correlation | |||||||||
| Quanto correlation | ( | |||||||||||||
| Equity volatility | ||||||||||||||
| Foreign exchange volatility | ||||||||||||||
| Credit Default model | Quanto correlation | |||||||||||||
| (1) | Valuation techniques and unobservable inputs for insignificant Level 3 financial assets and liabilities are excluded. |
| (2) | The Group has determined that the net asset value represents fair values of certain investment funds. |
| (3) | Fair values of certain equity instruments such as unlisted stocks are estimated on the basis of an analysis of the investee’s financial position and results, risk profile, prospects and other factors. A range of key inputs is not provided in these tables as it is not practical to do so given the nature of such valuation techniques. |
| (4) | Derivatives embedded in financial liabilities, except for financial liabilities designated at fair value through profit or loss, are separately accounted for, but presented together with the host contract in the consolidated statements of financial position. In these tables, the separated embedded derivatives whose host contracts are carried at amortized cost are presented within others. Although the separated embedded derivatives may have a positive or a negative fair value, they have been presented in these tables as liabilities to be consistent with the host contract. |
At March 31, 2025 |
||||||||||||||||||||
Total fair value measured using valuation techniques |
Effect recorded in profit or loss |
Effect recorded directly in equity |
||||||||||||||||||
Favorable changes |
Unfavorable changes |
Favorable changes |
Unfavorable changes |
|||||||||||||||||
(In millions) |
||||||||||||||||||||
| Financial instruments—net: |
||||||||||||||||||||
| Trading assets: |
||||||||||||||||||||
| Debt instruments |
¥ |
¥ |
¥ |
¥ |
¥ |
|||||||||||||||
| Derivative financial instruments—net: |
||||||||||||||||||||
| Interest rate derivatives—net |
( |
) |
||||||||||||||||||
| Currency derivatives—net |
( |
) |
||||||||||||||||||
| Equity derivatives—net |
||||||||||||||||||||
| Credit derivatives—net |
||||||||||||||||||||
| Financial assets at fair value through profit or loss: |
||||||||||||||||||||
| Debt instruments |
||||||||||||||||||||
| Equity instruments |
||||||||||||||||||||
| Investment securities at fair value through other comprehensive income: |
||||||||||||||||||||
| Equity instruments |
||||||||||||||||||||
| Financial liabilities designated at fair value through profit or loss (1) |
( |
) |
||||||||||||||||||
| Others (1)(2) —liabilities: |
||||||||||||||||||||
At March 31, 2024 |
||||||||||||||||||||
Total fair value measured using valuation techniques |
Effect recorded in profit or loss |
Effect recorded directly in equity |
||||||||||||||||||
Favorable changes |
Unfavorable changes |
Favorable changes |
Unfavorable changes |
|||||||||||||||||
(In millions) |
||||||||||||||||||||
| Financial instruments—net: |
||||||||||||||||||||
| Derivative financial instruments—net: |
||||||||||||||||||||
| Interest rate derivatives—net |
¥ |
( |
) |
¥ |
¥ |
¥ |
— |
¥ |
— |
|||||||||||
| Currency derivatives—net |
( |
) |
— |
— |
||||||||||||||||
| Equity derivatives—net |
— |
— |
||||||||||||||||||
| Credit derivatives—net |
— |
— |
||||||||||||||||||
| Financial assets at fair value through profit or loss: |
||||||||||||||||||||
| Debt instruments |
— |
— |
||||||||||||||||||
| Equity instruments |
— |
— |
||||||||||||||||||
| Investment securities at fair value through other comprehensive income: |
||||||||||||||||||||
| Equity instruments |
— |
— |
||||||||||||||||||
| Financial liabilities designated at fair value through profit or loss (1) |
( |
) |
— |
— |
||||||||||||||||
| Others (1)(2) —liabilities: |
— |
— |
||||||||||||||||||
| (1) | As part of risk management, the Group enters into transactions to offset the profit or loss of certain financial instruments, including embedded derivatives. Sensitivity of embedded derivatives related to these transactions is presented as derivative financial instruments or financial assets at fair value through profit or loss, according to the presentation of the financial instruments arising from these transactions. |
| (2) | Derivatives embedded in financial liabilities, except for financial liabilities designated at fair value through profit or loss, are separately accounted for, but presented together with the host contract in the consolidated statements of financial position. In these tables, the separated embedded derivatives whose host contracts are carried at amortized cost are presented within others. Although the separated embedded derivatives may have a positive or a negative fair value, they have been presented in these tables as liabilities to be consistent with the host contract. |
At March 31, 2025 |
||||||||||||||||||||||||
Carrying amount |
Fair value |
|||||||||||||||||||||||
Notes |
Total |
Level 1 |
Level 2 |
Level 3 |
||||||||||||||||||||
(In millions) |
||||||||||||||||||||||||
| Financial assets: |
||||||||||||||||||||||||
| Investment securities: |
||||||||||||||||||||||||
| Debt instruments at amortized cost |
a |
¥ |
¥ |
¥ |
¥ |
¥ |
||||||||||||||||||
| Loans and advances |
b |
|||||||||||||||||||||||
| Other financial assets |
b |
|||||||||||||||||||||||
| Financial liabilities: |
||||||||||||||||||||||||
| Deposits: |
||||||||||||||||||||||||
| Non-interest-bearing deposits, demand deposits and deposits at notice |
c |
¥ |
¥ |
¥ |
¥ |
¥ |
||||||||||||||||||
| Other deposits |
c |
|||||||||||||||||||||||
| Borrowings |
c |
|||||||||||||||||||||||
| Debt securities in issue |
c |
|||||||||||||||||||||||
| Other financial liabilities |
c |
|||||||||||||||||||||||
At March 31, 2024 |
||||||||||||||||||||||||
Carrying amount |
Fair value |
|||||||||||||||||||||||
Notes |
Total |
Level 1 |
Level 2 |
Level 3 |
||||||||||||||||||||
(In millions) |
||||||||||||||||||||||||
| Financial assets: |
||||||||||||||||||||||||
| Investment securities: |
||||||||||||||||||||||||
| Debt instruments at amortized cost |
a |
¥ |
¥ |
¥ |
¥ |
¥ |
— |
|||||||||||||||||
| Loans and advances |
b |
— |
||||||||||||||||||||||
| Other financial assets |
b |
— |
||||||||||||||||||||||
| Financial liabilities: |
||||||||||||||||||||||||
| Deposits: |
||||||||||||||||||||||||
| Non-interest-bearing deposits, demand deposits and deposits at notice |
c |
¥ |
¥ |
¥ |
— |
¥ |
¥ |
— |
||||||||||||||||
| Other deposits |
c |
— |
||||||||||||||||||||||
| Borrowings |
c |
— |
||||||||||||||||||||||
| Debt securities in issue |
c |
— |
||||||||||||||||||||||
| Other financial liabilities |
c |
— |
||||||||||||||||||||||
| a. |
The fair values of debt instruments at amortized cost are determined using quoted prices in active markets or observable inputs other than quoted prices in active markets. | |||
| b. |
(i) | The carrying amounts of loans with no specified repayment dates represent a reasonable estimate of fair value, considering the nature of these financial instruments. | ||
| (ii) | Short-term financial assets: The carrying amounts represent a reasonable estimate of fair value. | |||
| (iii) | Long-term financial assets: Except for impaired loans and advances, the fair values are mostly determined using the DCF method taking into account certain factors including counterparties’ credit ratings, pledged collateral, and market interest rates. The fair values of impaired loans and advances are generally determined by discounting the estimated future cash flows over the time period they are expected to be recovered, and may be based on the appraisal value of underlying collateral as appropriate. | |||
| c. |
Note that some of the financial liabilities in this category include embedded derivatives, which are separately accounted for, but presented together with the host contract. | |||
| (i) | The carrying amounts of demand deposits and deposits without maturity represent a reasonable estimate of fair value, considering the nature of these financial instruments. | |||
| (ii) | Short-term financial liabilities: The carrying amounts represent a reasonable estimate of fair value. | |||
| (iii) | Long-term financial liabilities: The fair values are, in principle, based on the present values of future cash flows calculated using the funding costs for the remaining maturities. The fair values of debt securities in issue are based on a price quoted by a third party, such as a pricing service or broker, or the present values of future cash flows calculated using the rate derived from yields of bonds issued by SMFG, SMBC and other subsidiaries and publicly offered subordinated bonds published by securities firms. | |||
| (iv) | The carrying amounts and fair values of lease liabilities are not included in these tables. | |||
46 |
OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES |
At March 31, 2025 |
||||||||||||||||||||||||
Gross amounts of recognized financial assets and liabilities |
Gross amounts offset in statements of financial position (1) |
Net amounts presented in statements of financial position |
Related amounts not offset in statements of financial position (2) |
|||||||||||||||||||||
Financial instruments (3) |
Cash collateral |
Net amounts |
||||||||||||||||||||||
(In millions) |
||||||||||||||||||||||||
| Financial assets (4) : |
||||||||||||||||||||||||
| Reverse repurchase agreements and cash collateral on securities borrowed |
¥ | ¥ | ( |
) | ¥ | ¥ | ( |
) | ¥ | — | ¥ | |||||||||||||
| Derivative financial instruments |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
¥ | ¥ | ( |
) | ¥ | ¥ | ( |
) |
¥ | ( |
) |
¥ | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Financial liabilities (4) : |
||||||||||||||||||||||||
| Repurchase agreements and cash collateral on securities lent |
¥ | ¥ | ( |
) | ¥ | ¥ | ( |
) | ¥ | — | ¥ | |||||||||||||
| Derivative financial instruments |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
¥ | ¥ | ( |
) | ¥ | ¥ | ( |
) | ¥ | ( |
) | ¥ | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
At March 31, 2024 |
||||||||||||||||||||||||
Gross amounts of recognized financial assets and liabilities |
Gross amounts offset in statements of financial position (1) |
Net amounts presented in statements of financial position |
Related amounts not offset in statements of financial position (2) |
|||||||||||||||||||||
Financial instruments (3) |
Cash collateral |
Net amounts |
||||||||||||||||||||||
(In millions) |
||||||||||||||||||||||||
| Financial assets (4) : |
||||||||||||||||||||||||
| Reverse repurchase agreements and cash collateral on securities borrowed |
¥ | ¥ | ( |
) | ¥ | ¥ | ( |
) | ¥ | — | ¥ | |||||||||||||
| Derivative financial instruments |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
¥ | ¥ | ( |
) | ¥ | ¥ | ( |
) | ¥ | ( |
) | ¥ | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Financial liabilities (4) : |
||||||||||||||||||||||||
| Repurchase agreements and cash collateral on securities lent |
¥ | ¥ | ( |
) | ¥ | ¥ | ( |
) | ¥ | — | ¥ | |||||||||||||
| Derivative financial instruments |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
¥ | ¥ | ( |
) | ¥ | ¥ | ( |
) | ¥ | ( |
) | ¥ | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) | Amounts offset for derivative financial instruments include cash collateral. |
| (2) | The amounts of financial instruments and cash collateral have been limited to the net amounts presented in the consolidated statements of financial position so as not to include any over-collateralization. |
| (3) | Financial instruments include non-cash collateral at fair value. |
| (4) | Financial assets and liabilities include amounts that are both subject to and not subject to enforceable master netting arrangements or similar agreements. |
47 |
FINANCIAL RISK MANAGEMENT |
Obligor Grade |
Definition |
Borrower Category | ||
Domestic (C&I), etc. | ||||
J1 |
Very high certainty of debt repayment | Normal Borrowers | ||
J2 |
High certainty of debt repayment | |||
J3 |
Satisfactory certainty of debt repayment | |||
J4 |
Debt repayment is likely but this could change in cases of significant changes in economic trends or business environment depending on the situation | |||
J5 |
No problem with debt repayment over the short term, but not satisfactory over the mid to long term and the situation could change in cases of any changes in economic trends or business environment | |||
J6 |
Currently no problem with debt repayment, but it is highly likely that this could change in cases of significant changes in economic trends or business environment | |||
J7 |
Close monitoring is required due to problems in meeting loan terms and conditions, sluggish/unstable business, or financial problems | Borrowers Requiring Caution | ||
J7R |
Obligors with loans that are more than three months past due or with restructured loans within the “Borrowers Requiring Caution” category | Substandard Borrowers | ||
J8 |
Currently not bankrupt, but experiencing business difficulties, making insufficient progress in restructuring, and highly likely to go bankrupt | Potentially Bankrupt Borrowers | ||
J9 |
Though not yet legally or formally bankrupt, has serious business difficulties and rehabilitation is unlikely; thus, effectively bankrupt | Virtually Bankrupt Borrowers | ||
J10 |
Legally or formally bankrupt | Bankrupt Borrowers | ||
G1 |
Very high certainty or high certainty of debt repayment | Normal Borrowers | ||
G2 |
Satisfactory certainty of debt repayment | |||
G3 |
Debt repayment is likely but this could change in cases of significant changes in economic trends or business environment depending on the situation | |||
G4 |
Debt repayment is likely but this could change in cases of significant changes in economic trends or business environment | |||
G5 |
No problem with debt repayment over the short term, but not satisfactory over the mid to long term and the situation could change in cases of any changes in economic trends or business environment | |||
G6 |
Currently no problem with debt repayment, but it is highly likely that this could change in cases of significant changes in economic trends or business environment | |||
G7 |
Close monitoring is required due to problems in meeting loan terms and conditions, sluggish/unstable business, or financial problems | Borrowers Requiring Caution | ||
Obligor Grade |
Definition |
Borrower Category | ||
Domestic (C&I), etc. | ||||
G7R |
Obligors with loans that are more than three months past due or with restructured loans within the “Borrowers Requiring Caution” category | Substandard Borrowers | ||
G8 |
Currently not bankrupt, but experiencing business difficulties, making insufficient progress in restructuring, and highly likely to go bankrupt | Potentially Bankrupt Borrowers | ||
G9 |
Though not yet legally or formally bankrupt, has serious business difficulties and rehabilitation is unlikely; thus, effectively bankrupt | Virtually Bankrupt Borrowers | ||
G10 |
Legally or formally bankrupt | Bankrupt Borrowers | ||
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Credit risk exposures relating to assets on the consolidated statements of financial position: |
||||||||
| Deposits with banks |
¥ | ¥ | ||||||
| Call loans and bills bought |
||||||||
| Reverse repurchase agreements and cash collateral on securities borrowed |
||||||||
| Trading assets |
||||||||
| Derivative financial instruments |
||||||||
| Financial assets at fair value through profit or loss |
||||||||
| Investment securities: |
||||||||
| Debt instruments at amortized cost |
||||||||
| Debt instruments at FVOCI |
||||||||
| Loans and advances |
||||||||
| Other financial assets |
||||||||
| Credit risk exposures relating to off-balance sheet items(1) : |
||||||||
| Loan commitments |
||||||||
| Financial guarantees and other credit-related contingent liabilities |
||||||||
| |
|
|
|
|||||
| Total |
¥ | ¥ | ||||||
| |
|
|
|
|||||
| (1) | The off-balance sheet items represent the nominal amounts of undrawn loan commitments, financial guarantees and other credit-related contingent liabilities. |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Impaired loans and advances |
¥ | |
¥ | |
||||
| Financial effect of collateral and other credit enhancements |
||||||||
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Domestic |
¥ | ¥ | ||||||
| Foreign: |
||||||||
| Americas |
||||||||
| Europe |
||||||||
| Asia |
||||||||
| Others |
||||||||
| |
|
|
|
|||||
| Total foreign |
||||||||
| |
|
|
|
|||||
| Gross loans and advances |
||||||||
| Adjust: Unearned income, unamortized premiums—net and deferred loan fees—net |
( |
) | ( |
) | ||||
| Less: Allowance for loan losses |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Carrying amount |
¥ | ¥ | ||||||
| |
|
|
|
|||||
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Domestic: |
||||||||
| Manufacturing |
¥ | |
¥ | |||||
| Agriculture, forestry, fisheries and mining |
||||||||
| Construction |
||||||||
| Transportation, communications and public enterprises |
||||||||
| Wholesale and retail |
||||||||
| Finance and insurance |
||||||||
| Real estate and goods rental and leasing |
||||||||
| Services |
||||||||
| Municipalities |
||||||||
| Lease financing |
||||||||
| Consumer (1) |
||||||||
| Others |
||||||||
| |
|
|
|
|||||
| Total domestic |
||||||||
| |
|
|
|
|||||
| Foreign: |
||||||||
| Public sector |
||||||||
| Financial institutions |
||||||||
| Commerce and industry |
||||||||
| Lease financing |
||||||||
| Others |
||||||||
| |
|
|
|
|||||
| Total foreign |
||||||||
| |
|
|
|
|||||
| Gross loans and advances |
||||||||
| Adjust: Unearned income, unamortized premiums—net and deferred loan fees—net |
( |
) | ( |
) | ||||
| Less: Allowance for loan losses |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Carrying amount |
¥ | ¥ | ||||||
| |
|
|
|
|||||
| (1) | The balance in Consumer mainly consists of housing loans. The housing loan balances amounted to ¥ |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Real estate finance |
¥ | |
¥ | |||||
| Project finance |
||||||||
| Other structured finance |
||||||||
| |
|
|
|
|||||
| Total structured finance |
¥ | ¥ | ||||||
| |
|
|
|
|||||
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Secured loans (1) |
¥ | ¥ | ||||||
| Unsecured loans |
||||||||
| |
|
|
|
|||||
| Total consumer |
¥ | ¥ | ||||||
| |
|
|
|
|||||
| (1) | The secured loans and advances mainly represent housing loans. The housing loan balances amounted to ¥ |
At March 31, 2025 |
||||||||||||||||
12-month ECL |
Lifetime ECL not credit- impaired |
Lifetime ECL credit-impaired |
Total |
|||||||||||||
(In millions) |
||||||||||||||||
| Loans and advances at amortized cost: |
||||||||||||||||
| Normal |
||||||||||||||||
| J1-6 |
¥ | ¥ | ¥ | ¥ | ||||||||||||
| G1-6 |
||||||||||||||||
| Japanese government and local municipal corporations |
||||||||||||||||
| Other (1) |
||||||||||||||||
| Requiring caution |
||||||||||||||||
| J7 |
||||||||||||||||
| G7 |
||||||||||||||||
| Other (1) |
||||||||||||||||
| Impaired (2) |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Gross loans and advances |
||||||||||||||||
| Adjust: Unearned income, unamortized premiums—net and deferred loan fees—net |
( |
) | ||||||||||||||
| Less: Allowance for loan losses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Carrying amount |
¥ | |||||||||||||||
| |
|
|||||||||||||||
| (1) | The balance of “Other” includes housing loans, which amounted to ¥ |
| (2) | “Impaired” refers to loans and advances to borrowers with obligor grades not higher than 7R. |
At March 31, 2024 |
||||||||||||||||
12-month ECL |
Lifetime ECL not credit- impaired |
Lifetime ECL credit-impaired |
Total |
|||||||||||||
(In millions) |
||||||||||||||||
| Loans and advances at amortized cost: |
||||||||||||||||
| Normal |
||||||||||||||||
| J1-6 |
¥ |
¥ |
¥ |
— |
¥ |
|||||||||||
| G1-6 |
— |
|||||||||||||||
| Japanese government and local municipal corporations |
— |
— |
||||||||||||||
| Other (1) |
— |
|||||||||||||||
| Requiring caution |
||||||||||||||||
| J7 |
— |
— |
||||||||||||||
| G7 |
— |
— |
||||||||||||||
| Other (1) |
— |
— |
||||||||||||||
| Impaired (2) |
— |
— |
||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Gross loans and advances |
||||||||||||||||
| Adjust: Unearned income, unamortized premiums—net and deferred loan fees—net |
( |
) | ||||||||||||||
| Less: Allowance for loan losses |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Carrying amount |
¥ |
|||||||||||||||
| |
|
|||||||||||||||
| (1) | The balance of “Other” includes housing loans, which amounted to ¥ |
| (2) | “Impaired” refers to loans and advances to borrowers with obligor grades not higher than 7R. |
At March 31, 2025 |
||||||||||||||||
12-month ECL |
Lifetime ECL not credit- impaired |
Lifetime ECL credit-impaired |
Total |
|||||||||||||
(In millions) |
||||||||||||||||
| Loan commitments and financial guarantees (1) : |
||||||||||||||||
| Gross carrying amount |
¥ |
¥ |
¥ |
¥ |
||||||||||||
| Allowance for off-balance sheet items |
||||||||||||||||
At March 31, 2024 |
||||||||||||||||
12-month ECL |
Lifetime ECL not credit- impaired |
Lifetime ECL credit-impaired |
Total |
|||||||||||||
(In millions) |
||||||||||||||||
| Loan commitments and financial guarantees (1) : |
||||||||||||||||
| Gross carrying amount |
¥ |
¥ |
¥ |
¥ |
||||||||||||
| Allowance for off-balance sheet items |
||||||||||||||||
| (1) | Loan commitments are the undrawn components of loan commitments on which ECL can be separately identified from those on the drawn components. |
12-month ECL |
Lifetime ECL not credit- impaired |
Lifetime ECL credit-impaired |
Total |
|||||||||||||
(In millions) |
||||||||||||||||
| Loans and advances at amortized cost (1) : |
||||||||||||||||
| Balance at April 1, 2023 |
¥ | ¥ | ¥ | ¥ | ||||||||||||
| Transfer to 12-month ECL |
( |
) | ( |
) | — | |||||||||||
| Transfer to lifetime ECL not credit-impaired |
( |
) | ( |
) | — | |||||||||||
| Transfer to lifetime ECL credit-impaired |
( |
) | ( |
) | — | |||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net transfers between stages |
( |
) | ( |
) | — | |||||||||||
| Provision for loan losses |
||||||||||||||||
| Of which refinement of the ECL models (3) |
( |
) |
( |
) |
— |
( |
) | |||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Charge-offs |
— | — | ||||||||||||||
| Recoveries |
— | — | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net charge-offs |
— | — | ||||||||||||||
| Others (2) |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Balance at March 31, 2024 |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Transfer to 12-month ECL |
( |
) | ( |
) | ||||||||||||
| Transfer to lifetime ECL not credit-impaired |
( |
) | ( |
) | ||||||||||||
| Transfer to lifetime ECL credit-impaired |
( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net transfers between stages |
( |
) | ( |
) | ||||||||||||
| Provision for loan losses |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Charge-offs |
||||||||||||||||
| Recoveries |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net charge-offs |
||||||||||||||||
| Others (2) |
( |
) | ( |
) | ( |
) | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Balance at March 31, 2025 |
¥ | ¥ | ¥ | ¥ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| (1) | “Loans and advances at amortized cost” includes allowance for undrawn components of loan commitments issued to retail customers which cannot be separately identified from that for the drawn components. |
| (2) | Others mainly include foreign exchange translations. |
| (3) | The refinement of the ECL models is primarily the subdivision of the foreign region (Global) into three (U.S., European, and Asia-Pacific region) and the addition of key drivers for credit risks and losses such as short-term interest rate of Japan. This refinement constitutes a continued improvement towards more responsive models and is intended to better reflect the diversified growth trend of the portfolio in each foreign region and the effect of the lifting of the negative interest rate policy by the Bank of Japan. |
12-month ECL |
Lifetime ECL not credit-impaired |
Lifetime ECL credit-impaired |
Total |
|||||||||||||
(In millions) |
||||||||||||||||
| Loan commitments and financial guarantees (1) : |
||||||||||||||||
| Balance at April 1, 2023 |
¥ | ¥ | ¥ | ¥ | ||||||||||||
| Net transfers between stages |
( |
) | ( |
) | — | |||||||||||
| Provision (credit) for off-balance sheet items |
( |
) | ( |
) | ( |
) | ||||||||||
| Others |
— | — | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Balance at March 31, 2024 |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net transfers between stages |
¥ | ¥ | ( |
) | ¥ | ¥ | ||||||||||
| Provision for off-balance sheet items |
||||||||||||||||
| Others |
( |
) | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Balance at March 31, 2025 |
¥ | ¥ | ¥ | ¥ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| (1) | ECL allowance for loan commitments is that for the undrawn components of loan commitments, which can be separately identified from that for the drawn components. |
At March 31, 2025 |
||||||||||||||||
Trading assets (1) |
Financial assets at fair value through profit or loss (1) |
Debt instruments at amortized cost (1)(2) |
Debt instruments at fair value through other comprehensive income (1)(2) |
|||||||||||||
(In millions) |
||||||||||||||||
| AAA |
¥ |
¥ |
¥ |
¥ |
||||||||||||
| AA- to AA+ |
||||||||||||||||
| A- to A+ |
||||||||||||||||
| Lower than A- |
||||||||||||||||
| Unrated |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total |
¥ |
¥ |
¥ |
¥ |
||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
At March 31, 2024 |
||||||||||||||||
Trading assets (1) |
Financial assets at fair value through profit or loss (1) |
Debt instruments at amortized cost (1)(2) |
Debt instruments at fair value through other comprehensive income (1)(2) |
|||||||||||||
(In millions) |
||||||||||||||||
| AAA |
¥ |
¥ |
— |
¥ |
— |
¥ |
||||||||||
| AA- to AA+ |
||||||||||||||||
| A- to A+ |
— |
|||||||||||||||
| Lower than A- |
||||||||||||||||
| Unrated |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total |
¥ |
¥ |
¥ |
¥ |
||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| (1) | The amounts represent fair value for trading assets and financial assets at fair value through profit or loss, whereas they represent the gross carrying amount for debt instruments at amortized cost and at fair value through other comprehensive income. |
| (2) | There were no debt instruments at amortized cost or debt instruments at fair value through other comprehensive income subject to lifetime ECL at March 31, 2025 and 2024. |
| • | the historical simulation method; |
| • | a one-sided confidence interval of 99.0%; |
| • | a one-day holding period (a |
| • | an observation period of |
| (a) | VaR for Trading Activity |
Interest rate risk |
Foreign exchange risk |
Equities and commodities risk |
Others |
Total (1) |
||||||||||||||||
(In billions) |
||||||||||||||||||||
| For the fiscal year ended March 31, 2025: |
||||||||||||||||||||
| SMBC Consolidated |
||||||||||||||||||||
| Maximum |
¥ | ¥ | ¥ | ¥ | ¥ | |||||||||||||||
| Minimum |
||||||||||||||||||||
| Daily average |
||||||||||||||||||||
| At March 31, 2025 |
||||||||||||||||||||
| SMFG Consolidated |
||||||||||||||||||||
| Maximum |
¥ | ¥ | ¥ | ¥ | ¥ | |||||||||||||||
| Minimum |
||||||||||||||||||||
| Daily average |
||||||||||||||||||||
| At March 31, 2025 |
||||||||||||||||||||
Interest rate risk |
Foreign exchange risk |
Equities and commodities risk |
Others |
Total (1) |
||||||||||||||||
(In billions) |
||||||||||||||||||||
| For the fiscal year ended March 31, 2024: |
||||||||||||||||||||
| SMBC Consolidated |
||||||||||||||||||||
| Maximum |
¥ | ¥ | ¥ | ¥ | ¥ | |||||||||||||||
| Minimum |
||||||||||||||||||||
| Daily average |
||||||||||||||||||||
| At March 31, 2024 |
||||||||||||||||||||
| SMFG Consolidated |
||||||||||||||||||||
| Maximum |
¥ | ¥ | ¥ | ¥ | ¥ | |||||||||||||||
| Minimum |
||||||||||||||||||||
| Daily average |
||||||||||||||||||||
| At March 31, 2024 |
||||||||||||||||||||
| (1) | Total for “Maximum,” “Minimum,” and “Daily average” represents the maximum, minimum and daily average of the total of the trading book. |
| (b) | VaR for Non-Trading Activity |
| (i) | Banking |
Interest rate risk |
Foreign exchange risk |
Equities and commodities risk |
Others |
Total (1) |
||||||||||||||||
(In billions) |
||||||||||||||||||||
| For the fiscal year ended March 31, 2025: |
||||||||||||||||||||
| SMBC Consolidated |
||||||||||||||||||||
| Maximum |
¥ | ¥ | ¥ | ¥ | ¥ | |||||||||||||||
| Minimum |
||||||||||||||||||||
| Daily average |
||||||||||||||||||||
| At March 31, 2025 |
||||||||||||||||||||
| SMFG Consolidated |
||||||||||||||||||||
| Maximum |
¥ | ¥ | ¥ | ¥ | ¥ | |||||||||||||||
| Minimum |
||||||||||||||||||||
| Daily average |
||||||||||||||||||||
| At March 31, 2025 |
||||||||||||||||||||
Interest rate risk |
Foreign exchange risk |
Equities and commodities risk |
Others |
Total (1) |
||||||||||||||||
(In billions) |
||||||||||||||||||||
| For the fiscal year ended March 31, 2024: |
||||||||||||||||||||
| SMBC Consolidated |
||||||||||||||||||||
| Maximum |
¥ | ¥ | ¥ | ¥ | ¥ | |||||||||||||||
| Minimum |
||||||||||||||||||||
| Daily average |
||||||||||||||||||||
| At March 31, 2024 |
||||||||||||||||||||
| SMFG Consolidated |
||||||||||||||||||||
| Maximum |
¥ | ¥ | ¥ | ¥ | ¥ | |||||||||||||||
| Minimum |
||||||||||||||||||||
| Daily average |
||||||||||||||||||||
| At March 31, 2024 |
||||||||||||||||||||
| (1) | Total for “Maximum,” “Minimum,” and “Daily average” represents the maximum, minimum and daily average of the total of the banking book. |
| (ii) | Equity Holding Investment |
Equities risk |
||||
(In billions) |
||||
| For the fiscal year ended March 31, 2025: |
||||
| SMBC Consolidated |
||||
| Maximum |
¥ | |||
| Minimum |
||||
| Daily average |
||||
| At March 31, 2025 |
||||
| SMFG Consolidated |
||||
| Maximum |
¥ | |||
| Minimum |
||||
| Daily average |
||||
| At March 31, 2025 |
||||
Equities risk |
||||
(In billions) |
||||
| For the fiscal year ended March 31, 2024: |
||||
| SMBC Consolidated |
||||
| Maximum |
¥ | |||
| Minimum |
||||
| Daily average |
||||
| At March 31, 2024 |
||||
| SMFG Consolidated |
||||
| Maximum |
¥ | |||
| Minimum |
||||
| Daily average |
||||
| At March 31, 2024 |
||||
| • | The use of historical data as a proxy for estimating future events may underestimate the probability of extreme market movements. Past market movement is not necessarily a good indicator of future events; |
| • | The use of a holding period assumes that all positions can be liquidated or hedged in that period of time. This assumption does not fully capture the market risk arising during periods of illiquidity, when liquidation or hedging in that period of time may not be possible; |
| • | The use of a confidence level neither takes account of, nor makes any statement about, any losses that might occur beyond this level of confidence; and |
| • | VaR does not capture all of the complex effects of the risk factors on the value of positions and portfolios and could underestimate potential losses. |
| (a) | Interest rate risk |
| (b) | Foreign exchange risk |
| (c) | Equity holding investment risk |
At March 31, 2025 |
||||||||||||||||||||||||||||
On demand |
Not later than three months |
Later than three months and not later than one year |
Later than one year and not later than three years |
Later than three years and not later than five years |
Later than five years |
Total |
||||||||||||||||||||||
(In millions) |
||||||||||||||||||||||||||||
| Non-derivative financial instruments: |
||||||||||||||||||||||||||||
| Deposits |
¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | |||||||||||||||||||||
| Call money and bills sold |
||||||||||||||||||||||||||||
| Repurchase agreements and cash collateral on securities lent |
||||||||||||||||||||||||||||
| Trading liabilities |
||||||||||||||||||||||||||||
| Financial liabilities designated at fair value through profit or loss |
||||||||||||||||||||||||||||
| Borrowings |
||||||||||||||||||||||||||||
| Debt securities in issue |
||||||||||||||||||||||||||||
| Lease payable |
||||||||||||||||||||||||||||
| Other financial liabilities |
||||||||||||||||||||||||||||
| Off balance sheet items: |
||||||||||||||||||||||||||||
| Loan commitments |
||||||||||||||||||||||||||||
| Financial guarantees and other credit-related contingent liabilities |
||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total non-derivative financial instruments |
¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Derivative financial instruments |
¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
At March 31, 2024 |
||||||||||||||||||||||||||||
On demand |
Not later than three months |
Later than three months and not later than one year |
Later than one year and not later than three years |
Later than three years and not later than five years |
Later than five years |
Total |
||||||||||||||||||||||
(In millions) |
||||||||||||||||||||||||||||
| Non-derivative financial instruments: |
||||||||||||||||||||||||||||
| Deposits |
¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | |||||||||||||||||||||
| Call money and bills sold |
— | — | ||||||||||||||||||||||||||
| Repurchase agreements and cash collateral on securities lent |
— | — | — | |||||||||||||||||||||||||
| Trading liabilities |
— | — | — | — | — | |||||||||||||||||||||||
| Financial liabilities designated at fair value through profit or loss |
— | |||||||||||||||||||||||||||
| Borrowings |
||||||||||||||||||||||||||||
| Debt securities in issue |
— | |||||||||||||||||||||||||||
| Lease payable |
— | |||||||||||||||||||||||||||
| Other financial liabilities |
— | — | ||||||||||||||||||||||||||
| Off balance sheet items: |
||||||||||||||||||||||||||||
| Loan commitments |
— | — | — | — | — | |||||||||||||||||||||||
| Financial guarantees and other credit-related contingent liabilities |
— | — | — | — | — | |||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total non-derivative financial instruments |
¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Derivative financial instruments |
¥ | ¥ | ¥ | ¥ | ¥ | ¥ | ¥ | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| 1. | Embedded derivatives which are separately accounted for, but presented together with the host contract in the consolidated statements of financial position are not included in the tables above as they relate to the interest cash flows of the host contract, which are also not included in the tables above. |
| 2. | Derivative financial instruments are recorded at fair value. Except for items designated as hedging instruments for fair value hedge, they are included in the column “On demand.” |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Loans and advances |
¥ | ¥ | ||||||
| Deposits |
||||||||
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
Domestic offices: |
||||||||
Non-interest-bearing demand deposits |
¥ | ¥ | ||||||
Interest-bearing demand deposits |
||||||||
Deposits at notice |
||||||||
Time deposits |
||||||||
Negotiable certificates of deposit |
||||||||
Others |
||||||||
Total domestic offices |
||||||||
Foreign offices: |
||||||||
Non-interest-bearing demand deposits |
||||||||
Interest-bearing demand deposits |
||||||||
Deposits at notice |
||||||||
Time deposits |
||||||||
Negotiable certificates of deposit |
||||||||
Others |
||||||||
Total foreign offices |
||||||||
Total deposits |
¥ | ¥ | ||||||
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In billions, except percentages) |
||||||||
| SMFG Consolidated: |
||||||||
| Total risk-weighted capital ratio |
% | % | ||||||
| Tier 1 risk-weighted capital ratio |
% | % | ||||||
| Common Equity Tier 1 risk-weighted capital ratio |
% | % | ||||||
| Total capital (Common Equity Tier 1 capital + Additional Tier 1 capital + Tier 2 capital) |
¥ | |
¥ | |
||||
| Tier 1 capital (Common Equity Tier 1 capital + Additional Tier 1 capital) |
||||||||
| Common Equity Tier 1 capital |
||||||||
| Risk-weighted assets |
||||||||
| The amount of minimum total capital requirements (1) |
||||||||
| (1) | The amount of minimum total capital requirements is calculated by multiplying risk-weighted assets by |
48 |
RELATED-PARTY TRANSACTIONS |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Assets: |
||||||||
| Loans and advances |
¥ | ¥ | ||||||
| Others |
||||||||
| Liabilities: |
||||||||
| Deposits |
¥ | ¥ | ||||||
| Others |
||||||||
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
| Income statements: |
||||||||||||
| Income (interest income, fee and commission income, and others) |
¥ | ¥ | |
¥ | |
|||||||
| Expense (interest expense and others) |
||||||||||||
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Assets: |
||||||||
| Loans and advances |
¥ | ¥ | ||||||
| Liabilities: |
||||||||
| Deposits |
¥ | ¥ | ||||||
| Others |
||||||||
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
| Short-term employee benefits |
¥ | |
¥ | |
¥ | |
||||||
| Share-based compensation |
||||||||||||
49 |
PRINCIPAL SUBSIDIARIES |
Company Name |
Proportion of Ownership Interest (1) |
Proportion of Voting Rights (1) |
Main Business | |||||||
(%) |
(%) |
|||||||||
Sumitomo Mitsui Banking Corporation |
||||||||||
SMBC Trust Bank Ltd. |
||||||||||
SMBC Guarantee Co., Ltd. |
||||||||||
SMBC Nikko Securities Inc. |
||||||||||
Sumitomo Mitsui Card Company, Limited |
||||||||||
SMBC Consumer Finance Co., Ltd. |
||||||||||
JRI Holdings, Limited |
||||||||||
The Japan Research Institute, Limited |
||||||||||
Sumitomo Mitsui DS Asset Management Company, Limited |
||||||||||
Alternative Investment Capital Limited |
||||||||||
SMBC Venture Capital Co., Ltd. |
||||||||||
SMBC Consulting Co., Ltd. |
||||||||||
Japan Pension Navigator Co., Ltd. |
||||||||||
| (1) | Percentages of proportion of ownership interest and proportion of voting rights have been truncated. |
Company Name |
Country of Incorporation |
Proportion of Ownership Interest (1) |
Proportion of Voting Rights (1) |
Main Business | ||||||||
(%) |
(%) |
|||||||||||
SMBC Bank International plc |
||||||||||||
Sumitomo Mitsui Banking Corporation (China) Limited |
||||||||||||
PT Bank SMBC Indonesia Tbk |
(2) |
|||||||||||
SMBC Americas Holdings, Inc. |
||||||||||||
SMBC MANUBANK |
||||||||||||
Banco Sumitomo Mitsui Brasileiro S.A |
||||||||||||
JSC Sumitomo Mitsui Rus Bank |
||||||||||||
SMBC Bank EU AG |
||||||||||||
Sumitomo Mitsui Banking Corporation Malaysia Berhad |
||||||||||||
SMBC Leasing and Finance, Inc. |
||||||||||||
SMBC Nikko Securities America, Inc. |
||||||||||||
SMBC Nikko Capital Markets Limited |
||||||||||||
SMBC Capital Markets, Inc. |
||||||||||||
TT International Asset Management Ltd |
||||||||||||
SMFG India Credit Company Limited |
||||||||||||
| (1) | Percentages of proportion of ownership interest and proportion of voting rights have been truncated. |
| (2) | During the fiscal year ended March 31, 2020, the Group disposed of a equity interest in PT Bank SMBC Indonesia Tbk (formerly known as PT Bank BTPN Tbk) to a third-party investor. Subsequently, in the fiscal year ended March 31, 2024, the Group disposed of an additional |
50 |
STRUCTURED ENTITIES |
| • | restricted activities; |
| • | a narrow and well-defined objective; |
| • | insufficient equity to permit the structured entity to finance its activities without subordinated financial support; or |
| • | financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches). |
At March 31, 2025 |
||||||||||||||||||||
Securitizations |
Investment funds |
Structured finance |
Others |
Total |
||||||||||||||||
(In millions) |
||||||||||||||||||||
| Interests in unconsolidated structured entities recognized in: |
||||||||||||||||||||
| Trading assets |
¥ |
¥ |
¥ |
¥ |
¥ |
|||||||||||||||
| Financial assets at fair value through profit or loss |
||||||||||||||||||||
| Investment securities |
||||||||||||||||||||
| Loans and advances |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
¥ |
¥ |
¥ |
¥ |
¥ |
|||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Maximum exposure to loss from interests in unconsolidated structured entities |
¥ |
¥ |
¥ |
¥ |
¥ |
|||||||||||||||
At March 31, 2024 |
||||||||||||||||||||
Securitizations |
Investment funds |
Structured finance |
Others |
Total |
||||||||||||||||
(In millions) |
||||||||||||||||||||
| Interests in unconsolidated structured entities recognized in: |
||||||||||||||||||||
| Trading assets |
¥ |
¥ |
¥ |
— |
¥ |
— |
¥ |
|||||||||||||
| Financial assets at fair value through profit or loss |
— |
|||||||||||||||||||
| Investment securities |
— |
|||||||||||||||||||
| Loans and advances |
— |
|||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
¥ |
¥ |
¥ |
¥ |
¥ |
|||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Maximum exposure to loss from interests in unconsolidated structured entities |
¥ |
¥ |
¥ |
¥ |
¥ |
|||||||||||||||
51 |
ACQUISITIONS |
52 |
CURRENT AND NON-CURRENT DISTINCTION |
At March 31, 2025 |
||||||||||||
Amounts recovered or settled |
||||||||||||
Not more than twelve months |
More than twelve months |
Total |
||||||||||
(In millions) |
||||||||||||
| Assets: |
||||||||||||
| Call loans and bills bought |
¥ |
¥ |
¥ |
|||||||||
| Reverse repurchase agreements and cash collateral on securities borrowed |
||||||||||||
| Financial assets at fair value through profit or loss |
||||||||||||
| Investment securities: |
||||||||||||
| Debt instruments at amortized cost |
||||||||||||
| Debt instruments at fair value through other comprehensive income |
||||||||||||
| Equity instruments at fair value through other comprehensive income |
||||||||||||
| Loans and advances |
||||||||||||
| Other financial assets |
||||||||||||
| Liabilities: |
||||||||||||
| Deposits |
¥ |
¥ |
¥ |
|||||||||
| Call money and bills sold |
||||||||||||
| Repurchase agreements and cash collateral on securities lent |
||||||||||||
| Financial liabilities designated at fair value through profit or loss |
||||||||||||
| Borrowings |
||||||||||||
| Debt securities in issue |
||||||||||||
| Other financial liabilities |
||||||||||||
At March 31, 2024 |
||||||||||||
Amounts recovered or settled |
||||||||||||
Not more than twelve months |
More than twelve months |
Total |
||||||||||
(In millions) |
||||||||||||
| Assets: |
||||||||||||
| Call loans and bills bought |
¥ |
¥ |
¥ |
|||||||||
| Reverse repurchase agreements and cash collateral on securities borrowed |
||||||||||||
| Financial assets at fair value through profit or loss |
||||||||||||
| Investment securities: |
||||||||||||
| Debt instruments at amortized cost |
||||||||||||
| Debt instruments at fair value through other comprehensive income |
||||||||||||
| Equity instruments at fair value through other comprehensive income |
— |
|||||||||||
| Loans and advances |
||||||||||||
| Other financial assets |
||||||||||||
| Liabilities: |
||||||||||||
| Deposits |
¥ |
¥ |
¥ |
|||||||||
| Call money and bills sold |
||||||||||||
| Repurchase agreements and cash collateral on securities lent |
— |
|||||||||||
| Financial liabilities designated at fair value through profit or loss |
||||||||||||
| Borrowings |
||||||||||||
| Debt securities in issue |
||||||||||||
| Other financial liabilities |
||||||||||||
53 |
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (SMFG) |
At March 31, |
||||||||
2025 |
2024 |
|||||||
(In millions) |
||||||||
| Assets: |
||||||||
| Deposits with SMBC |
¥ | ¥ | ||||||
| Investments in SMBC |
||||||||
| Loans to SMBC |
||||||||
| Investments in other subsidiaries, associates and joint ventures |
||||||||
| Other assets |
||||||||
| Current tax assets |
||||||||
| |
|
|
|
|||||
| Total assets |
¥ | ¥ | ||||||
| |
|
|
|
|||||
| Liabilities and equity: |
||||||||
| Short-term borrowings from SMBC |
¥ | ¥ | ||||||
| Long-term borrowings |
||||||||
| Debt securities in issue due to other subsidiaries |
||||||||
| Debt securities in issue |
||||||||
| Other liabilities |
||||||||
| |
|
|
|
|||||
| Total liabilities |
||||||||
| |
|
|
|
|||||
| Shareholders’ equity |
||||||||
| Other equity instruments holders’ equity |
||||||||
| |
|
|
|
|||||
| Total equity |
||||||||
| |
|
|
|
|||||
| Total equity and liabilities |
¥ | ¥ | ||||||
| |
|
|
|
|||||
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
| Income: |
||||||||||||
| Interest income from SMBC |
¥ | ¥ | |
¥ | |
|||||||
| Dividends from SMBC |
||||||||||||
| Dividends from other subsidiaries, associates and joint ventures |
||||||||||||
| Fees and commission income from subsidiaries |
||||||||||||
| Other income |
||||||||||||
| |
|
|
|
|
|
|||||||
| Total income |
||||||||||||
| |
|
|
|
|
|
|||||||
| Expense: |
||||||||||||
| Interest expense to SMBC |
||||||||||||
| Interest expense to other subsidiaries |
||||||||||||
| Interest expense |
||||||||||||
| Operating and other expense |
||||||||||||
| |
|
|
|
|
|
|||||||
| Total expense |
||||||||||||
| |
|
|
|
|
|
|||||||
| Profit before tax |
||||||||||||
| Income tax expense |
( |
) | ( |
) | ( |
) | ||||||
| |
|
|
|
|
|
|||||||
| Net profit |
¥ | ¥ | ¥ | |||||||||
| |
|
|
|
|
|
|||||||
| Profit attributable to: |
||||||||||||
| Shareholders |
||||||||||||
| Other equity instruments holders |
||||||||||||
For the fiscal year ended March 31, |
||||||||||||
2025 |
2024 |
2023 |
||||||||||
(In millions) |
||||||||||||
| Operating Activities: |
||||||||||||
| Profit before tax |
¥ | ¥ | ¥ | |||||||||
| Income taxes paid—net |
||||||||||||
| Other operating activities—net |
( |
) | ||||||||||
| |
|
|
|
|
|
|||||||
| Net cash and cash equivalents provided by operating activities |
||||||||||||
| |
|
|
|
|
|
|||||||
| Investing Activities: |
||||||||||||
| Loans provided to SMBC |
( |
) | ( |
) | ( |
) | ||||||
| Investments in subsidiaries |
( |
) | ( |
) | ( |
) | ||||||
| Investments in associates and joint ventures |
( |
) | ( |
) | — | |||||||
| Other investing activities—net |
( |
) | ( |
) | ( |
) | ||||||
| |
|
|
|
|
|
|||||||
| Net cash and cash equivalents used in investing activities |
( |
) | ( |
) | ( |
) | ||||||
| |
|
|
|
|
|
|||||||
| Financing Activities: |
||||||||||||
| Net increase (decrease) of short-term borrowings from SMBC |
( |
) | ( |
) | ||||||||
| Proceeds from issuance of long-term borrowings |
||||||||||||
| Redemption of long-term borrowings |
( |
) | ( |
) | ( |
) | ||||||
| Proceeds from issuance of debt securities |
||||||||||||
| Proceeds from issuance of other equity instruments |
||||||||||||
| Redemption of debt securities |
( |
) | ( |
) | ( |
) | ||||||
| Redemption of other equity instruments |
— | ( |
) | |||||||||
| Dividends paid to shareholders |
( |
) | ( |
) | ( |
) | ||||||
| Coupons paid to other equity instruments holders |
( |
) | ( |
) | ( |
) | ||||||
| Purchases of treasury stock and proceeds from sales of treasury stock—net |
( |
) | ( |
) | ( |
) | ||||||
| |
|
|
|
|
|
|||||||
| Net cash and cash equivalents provided by (used in) financing activities |
( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|||||||
| Net increase (decrease) of cash and cash equivalents |
( |
) | ||||||||||
| Cash and cash equivalents at beginning of period |
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| |
|
|
|
|
|
|||||||
| Cash and cash equivalents at end of period |
¥ | ¥ | ¥ | |||||||||
| |
|
|
|
|
|
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FAQ
When will SMFG's 3-for-1 stock split take effect?
How much were SMFG's housing loans at 31 March 2025?
What new income-statement line item appears in SMFG's FY-2025 report?
What deferred-tax differences lacked local-tax recognition?
Why did SMFG record losses from derecognition of financial assets?
What is SMFG's current effective statutory tax rate?
